Stuart Knowles on how PI damages ought to be calculated.

Stuart Knowles is a partner at healthcare law practice The Lewington Partnership.

A lot of ink has been spilt recently discussing the correct formula to apply in calculating the multiplier in major personal injury (PI) cases. But most people have missed the real point.

Following the recent decision of the Court of Appeal in Thomas v Brighton Health Authority et al, lawyers will continue to use the traditional calculation based on a 4.5 per cent return on investment of a damages award. While we await the House of Lords' decision, defendant lawyers will seek to settle claims while the going is good.

Meanwhile, plaintiff PI and clinical negligence lawyers continue to declare that the current system is unfair and that the correct rate of return should be based on the ultra-safe rate of 3 per cent obtained from index linked Government Securities. This would mean higher multipliers and increased payouts.

At the same time, the Lord Chancellor, having committed himself to implementing the proposals of the Law Commission, has not yet stipulated the appropriate rate to be used by the courts as provided for under s.1(1) of the Damages Act 1996. It appears that the Government will await the Lords' decision.

Fundamentally, we apply the wrong approach to the calculation of damages in major injury cases. Here we have an opportunity to consider a fresh approach, one that may be lost.

It has been suggested that we should adopt a system where general damages are calculated with reference to life expectancy. I agree. But we should go further. Why calculate a lump sum at all for special damages? With structured settlements common in large claims our energies would be better invested in calculating the appropriate annual cost of care and so on, and then buying the appropriate policies (or self-funding) to provide for that annual cost. Is that too radical?

I suspect it is and most people will continue to argue over lump sums rather than considering how best to apply the principle that damages should compensate people as near as possible for their injuries.