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Smith Manchester Awards Andrew Ritchie Gough Square London

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					Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London




                 Smith v. Manchester Awards

                           HOW DO THE COURTS ASSESS:
                LOSS OF CAPACITY ON THE LABOUR MARKET?


                    A paper for the Personal Injury Bar Association
                                   Conference at Oxford
                                          April 2005




                                              By


                                      Andrew Ritchie,
                                          Barrister,
                                      9 Gough Square,
                                           London


                                          Copyright




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

Introduction
Two events in the last 6 years have made every barrister’s practice particularly difficult
when assessing damages in claims involving Smith v Manchester, awards for loss of
capacity on the labour market:


[1]      Since the introduction of the CPR and the focus on costs based issues it has
         become even more important for barristers to ensure that their advice on quantum
         is correct, not only on the overall sum, but also on each individual head of claim.


[2]      Since the imposition of conditional fee agreements the barrister may not get paid
         at all if he/she misjudges the level of award for future loss of capacity to earn and
         fails to beat a payment in.


So the assessment of damages for future loss of earning capacity is important both for the
client and the barrister.


In the past the assessment of the level of award which the court might make to a claimant
who has a restriction on the labour market was similar to the past time of nailing jelly to a
wall … messy, uncertain and inconsistent. So Smith & Manchester [S&M] damages are
generally under claimed because people are uncertain about them.


In this paper I shall consider the case law and the factors relevant to the assessment of
damages for loss of capacity on the labour market and try to identify a simple method of
categorising cases so that we can advise with some confidence on the likely level of
award.


It is noteworthy that the jurisprudence in this area of the law has developed during two
short periods – the first in the mid 1970s and the second in the early 1990s.


The scope of S&M awards:




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Distinguishing S&M from future loss of earnings: We need to distinguish S&M awards
from awards for pure loss of future earnings. The two are both parts of the same head of
loss: “future loss of earnings” but they are separate. So what is it that separates them?


The quickest way to identify how these heads of loss are separated is to look at a schedule
of loss: See the appendix -
        -     note that the future loss of earnings claim is split into two parts;
        -     the first part is that which is calculable by mathematics;
        -     the second, S&M, is that which is not so calculable.


This distinction lies at the root of the difference between:


        On the one hand – multiplier/multiplicand future loss of earnings [M&M]; and
        On the other hand – Smith v Manchester awards [S&M].


Future loss of earnings awards on the M&M basis: If a claimant has a permanent injury
which interferes with his capacity to work he will have a clam for future loss of earnings.
These claims are easily categorised into 3 types:


        [1]       Total loss of earnings: This may occur in claims where the accident has
        prevented the claimant from working at all and will continue to do so in future.
        For instance this will usually arise in cerebral palsy cases. The total loss is
        calculated by multiplying the annual loss by the appropriate multiplier.
        [2]       Partial loss of earnings: This may occur in claims where the claimant has
        managed to get back into work in some form but is earning less than he did (or
        would have done) but for the accident. So he has a continuing partial loss. This is
        easy enough to calculate. The annual loss (multiplicand) is multiplied by the
        number of years until retirement (adjusted to take into account some investment
        and life expectancy assumptions) - the multiplier.
        [3]       Gap claims: In this category the claimant is re-training or recovering and




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

          will not get back into work for a period of years, but thereafter he will be able to
          earn once again.    Alternatively the claimant will have to retire early due to his
          injuries.


These types of M&M future loss claims may overlap in some cases. Additionally, if the
loss is merely the loss of a chance (for instance if the claimant asserts he would in future
have been promoted and the Defendants refute the assertion), the calculation can be
scaled down by % to represent the loss of the chance on the grounds set out in Allied
Maples v. Simmons [1995] 1 WLR 1602 CA.


However the common characteristic for all of theses claims is that the court considers that
are capable of being calculated by using a multiplier and a multiplicand, they are M&M
claims.


Smith v Manchester awards:          It is logical to suggest that the starting point for S&M
awards is that they are not capable of being calculated by a multiplier/multiplicand
method. S&M awards are made to compensate claimants for the loss of earnings which
they may suffer in future if various eventualities occur. The loss is predictable but
speculative.


In work or out of work?      S&M awards are generally made where the claimant is in work
at the date of trial and it is foreseeable that at some time in future the Claimant will be
seeking alternative work on the open labour market.


The narrow “in work” definition of S&M was provided by Browne L.J. in Moeliker v.
Reyrolle [1977] 1 WLR 132 C.A.,:


          "This head of damage generally arises where a claimant is, at the time of the trial,
          in employment, but there is a risk that he may lose this employment at some time
          in the future and may then, as a result of his injury, be at a disadvantage in




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

        getting another job or an equally well paid job. It is a different head of damages
        from an actual loss of future earnings which can readily be proved at the time of
        trial" @ p 15


So the narrow view of the difference between M&M awards and S&M awards is as
follows. by the time of the trial if the claimant has returned to work, either in his old job
or a new one, his future loss of earnings may be split into two heads of loss:
[1]     M&M future loss of earnings: He may be in a lower paid job; or he may have
        lost the opportunity of advancement at work; or he may have to retire early, or
        have to take time off work for treatment. These are all pure claims for loss of
        future earnings and are calculated on the multiplier & multiplicand basis.
[2]     S&M loss: If he is at risk, at some time before his retirement date, of losing his
        present job and being thrown onto the job market, his injuries may put him at a
        disadvantage. Or if he planned to change job and retrain at some time in future
        and then re-enter the job market he may likewise be at a disadvantage.


However S&M awards have also been made in cases where the claimant is out of work at
the date of trial. It is logical for S&M awards to be made in such cases because the
Claimant’s state of employment at the date of trial does not detract from the fact (if the
evidence so proves) that his position on the labour market in future is weakened by the
injury. So, whether or not the Claimant is in work at the time of trial, where any potential
future loss of earnings is too speculative to attract an M&M calculation, the court will
package the loss into an S&M award.


S&M awards may cover any number of foreseeable but speculative loss situations. For
instance:


        [1]     Loss of earnings if the claimant is sacked or made redundant and has to
                seek another job on the labour market.
        [2]     Loss of earnings if the claimant chooses to leave his job for whatever




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

                 reason and seeks work elsewhere.
           [3]   Loss of earnings if the claimant stays in his present job but has a restricted
                 earnings ability within the employers organisation as a result of the
                 symptoms.
           [4]   Loss of earnings where the Claimant has not yet returned to work but will
                 soon and will thereafter be at a disadvantage throughout the remainder of
                 his working life.


Indeed the classic definition of S&M awards provided by Scarman LJ in Smith v.
Manchester [1974] 17 K.I.R. 1 C.A. made the scope very broad – they are to compensate
for the:


           "weakening of the claimant's competitive position in the open labour market."


Hybrid awards where the evidence is uncertain:
However clearly the distinction is drawn between future loss of earnings on an M&M
basis and S&M awards it is disregarded by judges in some cases where the evidence of
the Claimant’s earnings but for the accident is uncertain and the evidence of the
Claimant’s residual earning capacity is also uncertain.


For example in Mulry v William [1992] 1 PIQR Q24, a 51 year old man who suffered
lung damage had a more than 50% chance of developing lung cancer at some time in
future. He was still in work. P Bennett QC awarded £20,000 expressly as a mixture of
loss of future earnings and S&M damages.


A further example is Blamire v South Cumbria HA [1993] PIQR Q1, C.A., in which the
Claimant was a 22 year old nurse when she suffered a lower back injury with permanent
consequences. She had struggled on in light nursing work but eventually had to give up
nursing and worked part time in a residential home, then started a family. The trial judge
found that but for the accident she would have had a family and worked as a part time




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

nurse throughout her working life, and that as a result of the accident she would probably
work as a secretary or in light residential home work with reduced prospects of finding
and holding down such work. The Claimant sought future loss of earnings of £118,000
on an M&M basis with a multiplicand of £7,800. Mucullough J rejected the M&M
approach and made a lump sum award for future loss of earnings of £25,000. The Court
of Appeal approved of this approach, Steyn L.J., stating:


        “It was submitted to us that although the judge expressly referred in his judgment
        to the vulnerability of the Claimant in the labour market as a result of back
        trouble, nevertheless he overlooked it when he came to the assessment. … I have
        no doubt at all that the judge took that aspect fully into account in his assessment
        of damages. … the judge carefully assessed the risks for the Claimant. He had
        well in mind that it was his duty to look at the matter globally and to ask himself
        what was the present value of the risk of future financial loss. He had in mind
        that there was no perfect arithmetical way of calculating compensation in such a
        case. Inevitably one is drive to the broad brush approach. ”


Not mutually exclusive:
Despite being distinct categories in most cases, M&M and S&M awards are not mutually
exclusive. The Defendants in Frost v Palmer [1993] PIQR Q14 @ pQ22. argued that a
judge who awarded damages for loss of future earnings on a multiplier and multiplicand
basis was not empowered to award S & M damages as well. This was expressly rejected
by the Court of Appeal so M&M and S&M and not mutually exclusive.


Let us now look at the grounds which trigger an S&M award:


The injury - Prognosis is the trigger:
The first and most vital ground for a claim for damages for loss of capacity on the labour
market is the prognosis. If the claimant has suffered long term or permanent symptoms
then his lawyers should be considering Smith & Manchester damages. This is so whether




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

the symptoms are physical or psychological.


If the claimant’s condition has resolved by the time of the trial or settlement there can be
no award for S&M.        So for instance if the medical experts have advised that the
claimant’s injury was merely accelerated by the accident rather than caused by it (for
instance in a back injury case the expert may advise that there has been a 5 year
acceleration period), if the acceleration period ends before or at the time of trial then no
S&M award will be made. However if the acceleration period extends into the future then
an award may be made.


The Injury interfers with earning capacity
The second ground for a claim for S&M damages is the level of symptoms which the
claimant suffers. The requisite level which triggers an award is measured by the answer
to the question:


        “do the symptoms interfere with the claimant’s present or future capacity to work
        or earn?”


If the symptoms do not interfere at all with the claimant’s capacity to earn at present and
will not forseeably interfere with any work which the claimant may do in the future there
will be no S&M award. If on the other hand the symptoms do interfere with the
claimant’s present earning capacity or will do so at some time in future, whether his
present job or some future job he is likely to seek, then an S&M award may follow. It
should be born in mind that the mind set and prejudices of potential employers is also a
relevant factor. Despite the passing of the Disability Discrimination Act 1995 it is a
common experience in PI cases to hear a Claimant say that he applied for many jobs but
employers did not offer interviews when he disclosed that he had a back injury or a head
injury etc. on the application form.


The risk that the claimant will be on the labour market




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

The third ground is the arrival of the claimant on the labour market at some time in future.
In Moeliker, Browne LJ described the ground thus:


        “…: what is the risk that he will at some time before the end of his working life
        lose that job and be thrown on the labour market? … I think the questions is
        whether this is a real or substantial risk or is it a speculative or fanciful risk … a
         "useful check ... (for the trial judge) to evaluate the risk, which he should express
        as either a fraction or percentage of the claimant's estimated future working life,
        and then apply that fraction or percentage to the claimant's actual earnings at the
        date of trial" @ p 17


In the 1970s the courts looked at this as a risk of redundancy, but it is clear that the risk is
far wider than that and includes the claimant’s arrival on the labour market voluntarily.


How in practice does one evaluate the risk? What is a “real or substantial risk” that the
claimant will be “thrown” onto the job market before retirement date? Clearly a certainty
would qualify. It is suggested that a 50% probability would also qualify. But would a
25% chance qualify?
Guidance was given by per Neill LJ in Robson v Liverpool [1993] CA PIQR Q78. He
said that:


        “it is plain that there can be a real risk although the risk, … is “unlikely”
        provided it is a real risk, and that “substantial” does not mean that it is necessary
        for a plaintiff to show that the event of which that is a risk is likely to happen on
        the balance of probabilities” @ Q82.


So it would appear that a risk of 25% that the claimant will lose his job between trial and
his likely retirement date would be “real”. In Robson the claimant was a pavement layer.
He was 32. He suffered an eye injury and was blinded in one eye as a result. The injury
did not interfere with his work and his employers, the Defendants, thought very highly of




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

him and promised that his job was secure. He had worked for them since the age of 18
(14 years). However the employers were about to put their contracts out to tender and
there was no guarantee that they would win the contracts although it was likely that they
would.    The claimant did have a restriction on the open labour market because he could
no long drive public service vehicles or operate machinery. The trial judge dismissed the
claim for S&M damages on the basis that the level of risk was not sufficient to trigger the
award. The Court of Appeal allowed the claimant’s appeal on the basis that although the
risk was not “probable”, and was only “slight” (this word was used in the judgment at
Q84), that was enough to be real and substantial.


What if the claimant wants to leave voluntarily during his working life?
Neil LJ expressly envisaged S&M awards covering the loss of earnings which a claimant
might suffer is he chose to leave work voluntarily during the course of his working life
and included that in the basket of risks for which an S&M award was intended to
compensate. See Robson v Liverpool [1993] PIQR Q82:


         “for the purposes of assessing the “real” risk of someone losing his present job or
         ceasing to hold that particular employment – thus it may be that the claimant
         himself will decide to leave the employment voluntarily for some reason – the
         factors to be taken into account will be many and varied.”


This is sensible. In this age of free movement of people throughout Europe it would not
be right that a Claimant should be tied to one employer simply cause suffered an accident.
So a young man in his 20s or 30s may well give evidence to the court that he does not
intend and never did intend to stay as a brick layer in London all his life but instead
wanted to move to Europe and be and HGV driver, or sail around the world and then
settle down. In the last 30 years it has become less and less common for employees to
stay in one job or indeed in one line of work for the whole of their working lives.


How are S&M damages calculated?




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In Forey v London Buses [1992] PIQR Q48 LJ Taylor helpfully advised:


        "finding the appropriate figure ... must necessarily be imprecise ...It must involve
        weighing up all the circumstances as best one can and taking a stab ... One
        cannot say that it is precisely right because no figure can be arithmetically
        calculated in a case of this kind ...."


The Courts have experienced great difficulty in formulating a clear method of assessing
Smith and Manchester damages. We suggest that this is for the very reason identified
above. These awards are speculative and only arise where mathematical calculation is not
a sensible approach. So usually the courts take the "broad brush" approach. However
despite this hurdle sometimes the courts do adopt a mathematical approach and barristers
can glean some guidance from the reported decisions.


The broad brush approach or the mathematical approach?
In most cases the Judge weighs up all the factors in each particular case and awards a
lump sum. So in Smith v Manchester [1974] K.I.R. 1, the court felt it was clearly
inappropriate, when assessing this element of loss:


        "to attempt to calculate any annual sum or to apply to any annual sum so many
        years" purchase [p8].


The approach favoured by Scarman LJ was:


        "to look at the weakness so to speak in the round, take a note of the various
        contingencies, and do its best to reach an assessment which will do justice to the
        claimant."


In Moeliker v. Reyrolle [1976] 1 WLR 1323, [1977] 1 AER 9, the Court confirmed this
approach stating that such awards could not be calculated on the basis of a "mathematical




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

exercise".


The Law Commission, in their Report on Personal Injury Litigation & Assessment of
Damages (Law Commission no. 56) stated:


        "where the evidence precludes mathematical assessment the Court has perforce to
        make the best estimate it can, but that estimate is still an estimate of probable
        future pecuniary loss."


This makes life very difficult for the lawyer who needs to advise the claimant on what he
may receive. What should we do? Should we give in and abandon all logic when
advising on S&M awards? Should we assume that whatever we advise the court will
award something different and simply take the risk of loosing the case and failing to beat
a payment in?


A mathematic approach was approved by the Court of Appeal in Gunter v John [1993]
PIQR p67, the claimant was a wood machinist aged 35 at trial and suffered severe injuries
to his dominant hand: he lost one and a half fingers and had a stiff knuckle. He was still
in his old job and his employers were stable. The trial judge award £16,000 expressly
calculated as 2 years loss of earnings for S & M damages. The Defendant appealed
arguing that this method of calculation was faulted. Mann LJ stated:


        "The learned judge adopted the evaluation approach of multiplier and
        multiplicand which we were given to understand is now common place. There is
        no flaw in that method of approach." The award was upheld.


So here is an indication of an approach to S&M damages which may help lawyers to
advise on the correct level.    It should not be regarded as an M&M approach. The court
is not calculating the annual “loss” and multiplying it by a multiplier to the end of the
Claimant’s working life. Instead the court is taking a yardstick – the Claimant’s net




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annual earnings at the date of trial and trying to place the award for S&M on some sort of
scale. Lets see if we can discern how to operate the approach and how if at all it differs
from the M&M approach to future loss of earnings.


I suggest that there are 4 factors to be assessed in any S&M case.


The relevant 4 factors: -
[1]     Net annual income
In Moeliker, Browne LJ led the way:


        "the multiplier/multiplicand approach cannot provide a complete answer to this
        problem because of the many uncertainties involved.            The court must start
        somewhere, and I think that the starting point should be the amount which the
        claimant is earning at the time of the trial …”


The claimant’s annual income at the time of trial net of tax & NI is the starting point. This
figure should be used as the basis for any S&M award.        Hence all things being equal, for
the same injury, a merchant bank will receive a higher award than an bricklayer. Contrast
this with the multiplicand in M&M future loss cases which will be the continuing annual
loss. Of course if the Claimant is not in work at the time this annual income will be his
residual earning capacity and will need to be estimated.


[2]     The length of the remainder of working life
In Moeliker, Browne LJ went on to list the second factor:


        “ … and an estimate of the length of the rest of his working life."


So one would expect that the longer the remaining working period the higher the award
and the shorter the period the lower the award. The longest imaginable working life would
perhaps be from age 16 to 75: 59 years. The shortest: 1 year.




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[3]     The level of risk that the claimant will be on the labour market and the
         number of times
Each time in future that the claimant is searching for work he will be exposed to further
loss as a result of his restriction on the labour market caused by the injuries. Browne LJ
approached this factor in the following way:


        “This stage will not be reached unless a court has already decided that there is a
        substantial or real risk that a claimant will lose his present job at some time
        before the end of his working life, but it will now be necessary to go on and
        consider:-
                  (a) How great this risk is;         and (b) when it may materialise –
                  remembering that he may lose a job and be thrown onto the labour
                  market more than once (for example if he takes a job and then finds he
                  cannot manage it because of his disabilities).”


So if the claimant is working in an industry where frequent job changes are the norm his
S&M award is likely to be far higher than a Claimant with a similar injury in an industry
were a job for life is the norm.


[4]     The effect of the claimant's disability/handicap on his work capacity
The injury will speak for itself but the particular aspect which is relevant to S&M awards
is the affect which the symptoms have on the claimant’s capacity to work and to gain
work. Browne LJ put it like this:


        “the next stage is to consider how far he would be handicapped by his disability if
        he was thrown onto the labour market – that is, what would his chances of getting
        a job and an equally well paid job. Again all sort of variable factors will, or may,
        be relevant in particular cases – for example, a claimant’s age; his skills; the
        nature of his disability; whether he is only capable of one type of work, or




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

        whether he is or could be capable of others; whether he is tied to working in one
        particular area; the general situation in his trade or his area or both.”


So there will be cases where quite a severe and permanent injury will produce no S&M
award at all. For instance where a merchant banker looses 3 fingers one hand and this
does not affect his work. However the same injury could produce a quite substantial
S&M award for a bricklayer with no educational qualifications who can no longer carry
out many aspects of his physical work. Within this factor are a number of issues which
need to be evidenced.


       The claimant’s educational qualifications and his skills are relevant. If he is
        multi-skilled and his injury only affects one of his earning avenues then the S&M
        award will be at the lower end. If he is lacking almost all skills and is in low paid
        manual work and his hands or legs are injured, the award for S&M will be high.
       The claimant’s personality is relevant.
       The job profile of the claimant’s line of work and his area is relevant. If the
        claimant is in an area where jobs are plentiful and he can still do a wide range then
        the S&M award will be small. If he is in a deprived area with high unemployment
        and there is fierce competition for his type of work his S&M award will be high.


What evidence should the claimant call?
Proving S&M damages is not easy. If there is no relevant evidence the claimant will
receive no award. So in Herod v Bird’s eye [1975] 27.11.1975, CA unreported no award
was made because if a lack of evidence.
There are 6 common sources for evidence:


[1] The Doctor: the letter of instruction should alert the medical expert to the likelihood
of an S&M claim. Some well considered phrases in the report will be most helpful.
[2] The claimant The witness statement should include his evidence on the security of
his present job and the stability of his employers; their management conflicts; their order




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

book; his career and his life plans and his knowledge of the labour market in his type of
work. If he can give evidence of how tough it would be to find another job if he lost his
own then so much the better. If he can give evidence of how many employees have been
made redundant by his employers in the last few years and what he knows about the
future then that should be led. Also, if he plans to sail around the world or to change
careers later in life or to start a family and then, when the children grow up, return to
work, or simply plans to move to Coventry, in all these cases he/she will be back on the
labour market. These life plans were flagged as important by Neill LJ in Robson who
said: "thus it may be that the claimant himself will decide to leave the employment
voluntarily for some reason- the factors taken into account will be many and varied" @ p
Q82 The claimant should give evidence about how the injury affects his work at present.
If his present employers are being sympathetic to his symptoms one can submit that any
future employer may not be.
[3] An employment consultant An expert can assist, but to avoid costly and scanty reports
claimant lawyers will need to direct the consultant's mind to the relevant facts. In the
expert's report it is not uncommon to see details of the national figures for the length of
time for which people remain unemployed. These are useful. Also employment
consultants have access to surveys on the extra length of time it takes disabled persons to
find work. These should be included. It is not unusual to find the consultant stating that it
would take the injured man say "twice as long" to find work as the able bodied man.
Likewise details of the present state of the job market for the particular kind of work are
important. The expert should also be asked to estimate how many times the claimant is
likely to be thrown onto the labour market before his 65th birthday.
[4] The employers The claimant’s present employers may be approached to assist. In
some cases this is impossible. In others it is both possible and very helpful. If the
employers state that they have a rolling redundancy programme or they are "rationalising
their operations" or cannot guarantee the claimant's job for life, the foundations will be
laid. If the claimant only joined the company recently then it may operate a "last in first
out" policy. This should be put before the Court. Even if the employers asserts that they
will do their best to keep the claimant in employment that will not defeat the S&M claim.




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In Smith v Manchester the employers undertook to keep the claimant in their employ at an
old persons home as long as they could properly do so but Scarman LJ found:


        "in this particular case there is a possibility of a change in management in the
        old people's home which might lead to a personality clash between the claimant
        and her new manageress. There is a possibility of a change in policy by the
        corporation; it might decide to close down the home ..". S&M damages were
        awarded.


[5] The claimant's union. If the claimant is a member of a trade union or professional
body [for instance a nurse], his/her lawyer may be able to obtain useful supporting
information from the union or professional college about the claimant's damaged
employment prospects due to the permanent injury.
[6] Government statistics. The New Earnings survey is now used commonly in court as a
source of figures upon which to base submissions.


What evidence should the Defendant call?
[1]     The doctor The Defendants medical expert should be asked to consider the
Claimant’s earning capacity and set out the types of work which the Claimant is still
capable of fulfilling.
[2]     An employment consultant         The    Defendant may be able to prove that the
Claimant’s earning capacity has not reduced at all by showing other fields of work where
the Claimant could earn as much if not more than his pre-accident field. It is not
uncommon for a manual worker who suffers a back injury and who is restricted to light
semi-sedentary work to consider moving into supervisory work at a higher rate of pay as a
result of the accident.
[3]     The employer It is useful to obtain evidence from the employer of the high regard
in which the Claimant is held and the job security he has to ensure that S&M awards are
kept to a reasonable level.




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Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

How big are the awards?
Whereas there is no limit to the size of awards made for future loss of earnings [M&M] or
to the size of hybrid awards, S&M awards are usually limited to between 6 months and 5
years loss of the claimant's present net annual salary. This is a useful way of categorising
them but unfortunately many reports do not state what the claimant's net annual salary
was.


A maximum award?
There is no maximum. In Foster v. Tyne & Wear County Council [1986] 1 All E R 567
Lloyd LJ stated @ p 570:


        "... I would reject the argument ... that there is a normal maximum of 2 years' loss
        of salary". It was "… necessarily a matter of weighing up the risks and chances
        in all the circumstances of a particular case."


A Conventional award:
In some cases Judges have called the S&M award "a conventional award". For instance in
Tindale v Dowsett [1980] Kemp B2-022 A £3,000 award was described as "conventional"
and was made to a 42 year old man who suffered a shoulder injury and some continuing
symptoms together with emotional problems.


I suggest that there is no such "conventional" award because each case depends on its own
special facts. In Foster cited above on appeal the Defendant argued that the conventional
award for S & M was not more than 2 years loss of earnings. Lloyd LJ @ p 570 stated:


        "there is no such thing as a conventional approach”


I suggest that awards can conveniently be put into 3 categories:
Top:                            over 2 years salary




                                              18
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

Middle:                         1-2 years salary


Bottom:                         3 months – 1 year salary


Examples of cases categorised by the numbers of years earnings awarded:


Over 2 Years:
In Foster [1985] cited above A 35 year old HGV driver [earning about £7,300 npa]
suffered a serious, permanent tri-malleolar fracture of the left ankle injury. He had
restriction of movement and arthritis in the ankle which would deteriorate and “it was
quite possible the joint would have to be arthrodesed at some time in future.” He was off
work over 2 years. He had been employed by the Defendants for 13 years. He refused a
less arduous job with lower pay as a weighbridge attendant and at the date of trial was
back to work as an HGV driver and suffering no loss of earnings. He avoided all heavy
lifting. The medical expert advised “I think that as his ankle deteriorates during the
coming years he will probably have to give up the HGV work within 5-10 years”. He was
awarded S&M damages of £35,000, 5 times his net annual salary. The Defendant appeal.
described on appeal as "on the high side" but upheld.
Commentary: There was no award made for future loss of earnings on the “M&M”
basis. It is not clear why. The claimant would apparently have been restricted to less
remunerative work after he had to stop HGV driving at the age of 40/45. This appears to
be a hybrid award so key factors do not apply.


In Samuels v. Benning [2002] EWCA Civ 858, the claimant was refused an award for
future loss of earnings or S&M by the trial judge. He was a vehicle recovery driver who
suffered right shoulder and pelvic fractures together with head, neck and back injuries in a
road traffic accident in 1995 when he was aged 34. He had continuing permanent
symptoms in his neck and shoulder and lower back and reduced long distance walking
together with permanent personality changes. His work was terminated in 1996. His
employed were taken over and closed down by 1999 in any event. The claimant was still




                                              19
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

out of work at the trial in 2001. He was intending to start teacher training college. HHJ
Rice found that he had failed to mitigate his loss and retrain by the date of trial and
awarded no future loss of earnings or S&M. The Court of Appeal substituted a S&M
award of £35,000 representing 3 years net loss of pre-accident earnings. The Court noted
that there was insufficient evidence for a multiplicand/multiplier approach and that there
may have been some failure to mitigate however:


                “I note the nature of his employment history in which some of the jobs
                he did were heavier than others. The most one can say is that on the
                facts the appellant was not and is not unemployable but his
                employability is reduced to a substantial extent.” Laws LJ @ para 32.
4 Key factors: [1] net annual income: £12,000; [2] 30 years of working life to go; [3]
risk of being on labour market - almost a certainty at least once; [4] permanent injury
which interfered with work and would prevent work altogether in 5-10 years.


1 to 2 years:
In Forey v London Buses 1990 1 PIQR p48, a man aged 23 suffered a severe whiplash
injury. He was a gardener earning about £10,000 net per annum before the accident. He
had no academic qualifications. Afterwards he was permanently unfit to carry on
gardening work and only fit for clerical work. He made unsuccessful efforts to find work.
He was still out of work at the date of trial (3 years after the accident) but due to retrain
for clerical work. The judge found as a fact that soon after retraining he would earn the
same sums in clerical work as he would have earned as a gardener. He was awarded
£20,000, 2 years loss of earnings. The trial judge described his award as an S&M award.
This appears to have been a hybrid award for loss of future earnings whilst retraining,
perhaps for one year and loss of capacity on the labour market until retirement. The Court
of Appeal upheld the award.


Key Factors: Hybrid award hence ? factors do not apply. [1] £10,000 npa; [2] 42 years
of working life to go; [3] permanent injury which only affected one area of work,




                                              20
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

capacity in other are still high; [4] risk, a certainty, he was on the job market at trial.


In Underwood v Forman & British Midland [1996] CA reported in Kemp & Kemp at I2-
201, the claimant was a first officer ages 31 when the accident occurred in which his left
leg was so badly injured that it had to be amputated below the knee. He was 39 at trial.
He returned to work as a first officer 1 year after the accident and was so employed for 8
before the trial. He earned £25,000 npa. The judge held that if he were to lose his job
with BM he was unlikely to gain a pilots job elsewhere because many pilots were out of
work at the time. He was awarded £35,000 for S&M (1.4 years net loss of earnings). The
Court of Appeal examined the fact that the claimant had a 20 year work period in front of
him and a serious physical restriction and that he often had to rest his prosthesis due to
strain and hence might give up flying work early. They took into account redundancy
and the fact that the claimant might choose to change jobs. The award was upheld.


Key Factors: [1]£25,000 npa; [2] 34 years of working life remaining; [3] considerable
likelihood of being on labour market at least once;            [4] injury had obvious and
considerable adverse effect on work capacity on other lines and some effect in the pre-
accident line.


In Smith and Manchester, the claimant was a domestic worker aged 49. She slipped and
fractured her elbow. She suffered permanent frozen shoulder. She returned to work on
light duties. She had intended to work till 60/65. Her employers gave an undertaking
from her employer to keep her employed for as long as they properly could do so. The
trial judge awarded £300 [4 months net loss of earnings]. She was found to be at real risk
of loosing her employment before retirement date despite the undertaking. On appeal this
award was described by Lord Scarman as derisory and £1,000 was awarded [1.25 net
annual earnings].


Up to 1 year:
In Moeliker v. Reyrolle [1977] 1 WLR 137 the claimant was a manual worker aged 45. He




                                              21
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

suffered partial amputation of his left thumb and forefinger. He was still in work at the
date of trial. He was awarded £750 [equivalent to 6 months loss of salary]. The claimant
appealed. He argued that 6 months loss of earnings when the claimant had 40 years yet to
work was obviously too low. The court took into account the claimant's secure job and
the employers' high opinion of him and the award was upheld.


In Robson a 35 year old pavement layer who earned about £15,000 gross pa had worked
for the council since leaving school was injured at work: he lost one eye. The District
judge found that he had a secure job and there was no real risk that he would lose it before
retirement despite his age and disability. The Court of Appeal overturned that decision,
found that due to competitive tendering and personal reasons there was a slight but real
risk of his changing jobs and awarded £2500 [equivalent of 4 months net loss of
earnings].


In Hale v. London Underground (1992) PIQR Q30 the claimant, aged 44, was at the
King's Cross disaster an suffered PTSD. The prognosis was that it would be permanent.
He lost his pre-accident employment as a fireman [£14-16000 pa] and was transferred to
lighter duties but was unlikely to continue with the job more than 6 months. He would
then take 2 years to gain alternative lower paid employment. He would have retired at 55
anyway and looked for other work. He was awarded damages for loss of future earnings
to retirement age 55 of about £69,000 and S&M damages of about £8000 for his loss of
employment prospects after the age of 55 [less than one years salary].
Otton J stated "Assessment is not confined to a mere mathematical exercise. The award
must reflect all the contingencies revealed by the evidence in an attempt by the court to
reach an informed guestimate".


Conclusion:
When approaching pure S&M awards unpolluted by future loss of earnings on a
multiplier and multiplicand basis, most judges award between 6 months and 3 years loss
of net present income depending on the circumstances.




                                              22
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London



The main reason for this seems to be that however large the risk of the claimant losing his
job and being disadvantaged, the loss will always be speculative and will occur at some
time well into the future, so the sum needs to be discounted for early receipt: "the present
value of the future risk" the words of Browne LJ at p17 in Moeliker v Reyrolle.




ANDREW RITCHIE,
9 Gough Square
London April 2005




                                              23
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

                                                                    Case No: CL *
IN THE CENTRAL LONDON COUNTY COURT
BETWEEN:


                                           PAUL *
                                                                         claimant
                                            - and -


                                             *[1]
                                             * [2]
                                                                      Defendants


                             ___________________________


                                        SCHEDULE
                             ___________________________


The claimant’s dob:                     19.04.1966
Age now:                                35y 6m
Accident:                               18.08.1996
Age at date of accident:                30y 4m




                                              24
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

                                          Summary
Item                                                                       £
PSL                                                                   55,000
Interest                                                            ………..
PAST
Loss of earnings                                                      70,752
Care                                                                   1,565
Damaged Items                                                           860
Travel                                                                 2,140
Medical                                                                 105
Bills                                                                    80
Misc                                                                    100


Interest
FUTURE                                                              …………
Loss of earnings                                                     218,832
Smith v Manchester                                                    52,263
Retraining                                                             1,500


Total excluding interest                                            £350,934




                                              25
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London



Before the accident: the claimant was living in rented accommodation in Ealing, West
London, but had exchanged contracts to buy a property in Guildford. He was engaged
to * (a primary school teacher). He was fit and healthy other than some minor back
complaints in the past and some deafness in one ear. He enjoyed golf and squash.
Between 1986 and 31/1/1993 he worked as a salesman for * selling forms. He was
thick skinned, capable, successful and had the gift of the gab. He was made redundant
in January 1993 and did a business course. He started his own consultancy business
(PJC) in the same line as his father in early 1994 and in December 1994 became a
partner (on his mothers death) with his father in his consultancy business (DPC) on a
25% profit split. So in early 1996 he was self employed working with his father selling
and designing office furniture through two consultancies DPC and PJC. His father was
semi-retiring at the time in March 1996 and the claimant’s profit split was increased to
90%. Then in March 1996 the claimant’s soon to be father in law (*) offered him
employment 2-3 days a week with the family company * Engineering. Yardene
designed and made and sold components to the British railway system. The claimant
relies inter alia on the evidence of Mr. * who having spotted the claimant’s potential as
a salesman intended to groom him to become a director of the company when Mr. *
intended to retire.
The accident: the claimant was riding pillion on a motor cycle driven by the 1st
Defendant which whilst overtaking a car driven by the 2nd Defendant was involved in
an accident. Judgment has been entered for the claimant against the Defendants.
The injuries: the claimant suffered:
       serious head injuries causing, double vision, migraine headaches, reduced
        concentration and memory, reduced ability to organise and manage, increased
        temper, slowness of thought, impaired multi-tasking, early slurred speech, some
        balance disturbance, frontal lobe damage disinhibition in behaviour, reduced
        ability to manage money and reduced energy;
       the claimant has a substantially increased risk of developing epilepsy;
       a fractured collar bone;




                                              26
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

       3 fractured ribs;
       a fractured pelvis;
       soft tissue injuries.
Treatment: the claimant was in hospital for about 2 weeks. He was unconscious for 3
days and had amnesia for 7-10 days. He was cared for intensively by his family for 2-3
months. Since then he has undergone physiotherapy and 2 eye operations. He has
taken anti-depressant medication and counselling.
Medical reports: The claimant relies on the medical reports of:
Mr. *, consultant orthopaedic surgeon, dated 3/98 and 11/98;
Miss.*, consultant ophthalmic surgeon, dated 10/00 and 11/01;
Dr.* , consultant neurologist, dated 3/98; 6/98; 9/01;
Dr. *, consultant neuropsychologist, dated 7/98 and 7/99;
The Defendants report from Prof. * is agreed.
Complaints: the claimant’s continuing complaints are set out in the medical reports
and include:
       intrusive migraine style headaches once a week,
       persistent variable double vision;
       brain damage causing reduced concentration and memory, reduced ability to
        organise and manage, increased temper, slowness of thought, impaired multi-
        tasking, early slurred speech, some balance disturbance, frontal lobe damage
        disinhibition in behaviour, reduced ability to manage money and reduced
        energy;
       a substantially increased risk of epilepsy;
       A visible bony lump where his shoulder fracture was;
       A clicking jaw;
       His ability to drive safely is reduced (although he is actually doing a lot of
        driving);
       He cannot enjoy or participate effectively in sports.


General Damages:




                                              27
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

1.      Pain suffering and loss of amenity                                             £55,000
2.      Interest @ 2% pa since issue


PAST:
3.      Loss of earnings
        But for the accident: the claimant would have reduced his involvement with
        DC - *Designs and advanced through * a family company. * was the MD and
        Mrs. * s was a co-director. The company went into receivership in 1998 and a
        phoenix company was formed which continued the same business. The reason
        for the receivership was that one large customer failed to pay it’s debt to the
        company. American investors were brought in and are now sleeping directors.
        * continues to run the company and Mrs * take a small part time role. The
        company has prospered and turnover and profits have grown very well since
        1998.
        Mr. * was grooming the claimant and * his other son in law to become co-
        directors of the company on his retirement in 1998 (at age 55). As a result of
        the receivership he would probably have retired in 2000 at age 57. At that time
        the claimant would probably have become a director as * in fact did.
        The claimant relies on some of the calculations of Mr. *of * in his report of
        2000 which is out of date and does not accurately state the claimant’s case.
        Until an updated report is received the best that can be done is as follows:
        Projected income:
        Before the accident the claimant earned as follows:
        Tax year
        88/89:                  £9,439 net       M & P (* p5)
        89/90:                  £10,221 net      M&P
        90/91:                  £11,709 net      M&P
        91/92:                  £14,113 net      M&P
        92/93: to 31/1/93       £9,683 net       M&P
        1/2/93 – 12/93: (business course         - rest of year)




                                              28
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

        Calendar year:          (see * Appendix D)
        1994:                   £12,760 gross PJC
        1995:                   £ 8,208 gross DPC & PJC                 (Father earned £24,625)
        1996: (accident 8/96) £ 4,080 gross DPC & PJC               (F earned £453, retired 3/96)
        (including income from Yardene)
        Before the accident the turnover of PJC and DPC was between £35,000 and
        £48,000 every calendar year from 1991 – 1995 (see * appendix D). After the
        accident the turnover dropped to £17,619 and only increased in the calendar
        year 1997 as the claimant billed * regularly from around June/July 1997 (see
        Swift Appendix D page 6).
        The Claim is advanced on the basis that but for the accident the claimant would
        have wound down the business DPC – PJC with his father having already
        retired in March 1996. He was spending more and more time working for *. By
        August 1997 the claimant would have been working full time for * whether as
        an employee or still as a consultant as a salesman. It is likely that by October
        2000 he would have become a director of * or the parent company:
        In 2000 Mr. * and his wife received £52,250 gross. In 2001 they received
        £59,900 gross. The income was earned in the main by Mr. * and allocated for
        tax reasons half and half.
        The claimant relies on the employment reports of * dated May and June 2001
        (jointly instructed). She advises that but for the accident the claimant would
        have earned in 2000:
        £33,264 as a sales or marketing manager (* p10) or
        £63,000 total cash as a managing director (* p11) or
        £45,506 total cash as an “other director” (* p11).
        The claimant has not yet been provided with an updated accountancy report
        from Mr. *.
        As a result of the accident: the claimant was away from work for 5 months
        until January 1997 when he restarted part time with *. He never returned to
        consultancy with his father. He worked part time until June 1997 when he was




                                              29
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

        working full time subcontracting to * billing about £18,000 gpa. From May
        1998 he became employed by * earning £1,500 gpm or £18,000 gpa. The
        claimant is unable to fulfil his pre-accident sales, management or business role
        and is now in partially sheltered employment fulfilling a much reduced role. He
        is not capable of being a director and will never become one. His salary is
        reduced. He will not advance. If he looses his employment for whatever reason
        he will be in a severely reduced position on the labour market.
        The claim is advanced on the basis of the difference between what the claimant
        was likely to receive as a director and what he is likely to receive in his present
        sheltered employment.
        Projected income: the claimant is presently earning £23,300 with *. The
        claimant relies on the report of *. If he was thrown onto the labour market
        either when * retires or at any time thereafter he is likely to earn no more than
        the lower quartile level for sales executives (* p14 & 17) : £349.30 gpw or
        £18,164 gpa and is unlikely to rise beyond £23,291 gpa in the long term.


        Loss:
        the claimant should have received:                             £ net of tax & NI1
        8/96 – 7/97:      £18,000 gpa                                  £13,3202
        8/97 – 7/98:      £23,088 gpa3                                 £17,0854
        8/98 – 7/99:      £28,176 gpa5                                 £20,5686
        8/99 –7/00:       £33,264 sales manager7                       £24,6158
        8/00 – 7/01:      director £45,506 gpa9                        £31,85410


1
  Taken from PNBA facts and figures table G1
2
  26%
3
  Assuming linear growth between £18,000 starting salary and the marketing managers salary the * allots
to the claimant in the year 2000 @ p10.
4
  26%.
5
  See previous footnote.
6
  27%
7
  See * p 10
8
   26%
9
  See * p 11.




                                                  30
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

         8/01-11/01:        £46,871 (assuming 3% growth)                   £32,810
         sub total:                                                                           £140,252
         The claimant actually received:                                   £ net of tax & NI
                                              11
         2/97 – 4/98:       £19,300 gross (Swift appx D p6)                £14,28212
         5/98 – 4/99:       £18,000 gross13                                £13,320
         5/99 – 4/00:       £18,800 gross14                                £14,28815
         5/00 - 4/01: £23,288 gross                                        £17,42116
         5/01 – 11/01 £13,585 gross17                                      £10,189
         sub total:                                                                           £69,500
         Loss £140,252 less £69,500:                                                                   £70,752


4.       Care:
         Parental and family care:
         28/8/1996 – 31/9/1996:
         35dys x 4hpd x £4.86 ph =                      £680.40
         1/10/1996 – 31/12/1996:
         92 dys x 2hpd x £4.86 ph =                     £884.52
         total                                                                                           £1,565


5.       Damaged Items
         Jacket             400
         Helmet             300
         Gloves             80


10
   30%
11
    It was tax efficient to be a consultant at first. The claimant could write off depreciation on his car and
office at home and other expenses: see * Appendix D. As the claim is made ignoring expenses credit is
given for income ignoring expenses.
12
   26%
13
   pay slips show £1,500 gross per month: * Appendix K.
14
   see Mr. * report p5
15
   24% tax & NI
16
   25%
17
   7 months




                                                      31
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

        Shoes            40
        Jeans            40
        Total                                                                          £860


6.      Travel
        Hospital visits: 22 visits x 80 miles x 0.35 ppm £616
        Parking 22 x £3                                     £ 66
                                                            £682
        Dr * 3 vis x 3 miles }
        Physio 12 visits x 20 miles }
        RSC Hospital 6 visits x 6 miles }
        Dr. Beaumon 1 visit x 5 miles } all @ 0.35 ppm
        Parking 6 x £2                           £12
        Total                                              £114
        Transport to work
        Bus 48 weeks x £5.60 pd                           £1,344
        Total                                                                         £2,140


7.      Medical
        Glasses                  £100
        Eye patch                £ 5
                                                                                       £105
8.      Bills
        Increase heat and light and gas whilst the claimant was at home rather than
        working.                                                                        £80


9.      Misc
        Post and telephone calls                                                       £100


FUTURE




                                              32
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

10.       Loss of earnings
          The claimant would have been a director by 8/00 earning (see Mrs * evidence p
          11) either £63,000 gpa as managing director or £45,506 as another director. The
          claimant bases the claim on the more conservative figure.
          Multiplicand: £46,871 (assuming 3% growth) £32,810 net pa.
          Less actual current earnings: £23,288 gross or £17,42118 net pa.
          £32,810 - £17,421 = £15,389 npa.
          Multiplier: actuarial multiplier taking into account life expectancy: 20.32
          Ogden table 25 (assuming linear change between multiplier for age 35 and that
          for age 36).
          Contingencies reducing multiplier: possibility that the claimant would have
          retired before age 65. Possibility that the company would flounder. Possibility
          that the claimant would not have been made director. Estimated @ 30%.
          20.32 x 0.7 = 14.22.
          14.22 x £15,389 =                                                                              £218,832


          And the claimant is at a disadvantage on the labour market. The claimant
          may have to change jobs a number of times between now and age 65. He will
          be severely disadvantaged each time. When Mr. * retires he will not longer be
          protected. The claimant seeks an award of 3 times his net income of £17,421
          Claim                                                                                           £52,263


11.       Employment prospects training:
          If the claimant looses his job: Mary * advises seeking help from rehab UK.
          Cost £610 plus £475 per week for participation.
          Say                                                                                              £1,500


I, the claimant, believe that the facts stated in this statement of case are true.
Signed by the claimant ...............................................................................




                                                           33
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

OR
The claimant believes that the facts in this statement of case are true and I, the
claimant's solicitor, have:
(1)        authority to sign this statement;
(2)        explained the effect of this statement to the claimant;
(3)        informed the claimant of the consequences of my signing.
Signed by:
The claimant's solicitor's name: ..................................................................
The name of the firm: ..................................................................................


REDATED              2001                                                 ANDREW RITCHIE


To The District Judge,
And the Defendant


                                                                          Messrs: *
                                                               Solicitors for the claimant




18
     25%




                                                            34
Smith v Manchester Awards, Andrew Ritchie, 9 Gough Square, London

                                                                               Case No: *
                                                 IN THE CENTRAL LONDON
                                                 COUNTY COURT
                                                 BETWEEN:


                                                 *
                                                         claimant


                                                 and –


                                                 *[1]
                                                 * [2]
                                                                               Defendants




                                                 _____________________________


                                                 SCHEDULE
                                                 ______________________________




                                                 Messrs: *
                                                 Solicitors for the claimant




                                              35

				
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