In personal injury claims, the courts have to observe certain principles when calculating compensation for future losses.
In Atos Origin IT Services Ltd v Haddock (2005, IRLR 20), the employment appeal tribunal (EAT) said that the same principles apply to disability discrimination claims.
What were the facts?
Mr Haddock had worked for Sema, a multinational company employing over 20,000 people worldwide, in a variety of senior roles from 1983.
He was diagnosed with severe depression in early 1998 and was off work until July, when he returned part time to a less demanding job.
Unfortunately, at the end of that year, a new manager took over who redeployed him to a more junior post. Mr Haddock had another breakdown and did not return to work, although he remained on the payroll.
In April 1999, he made a claim for disability discrimination. The tribunal found in his favour and awarded him compensation totalling £65,000 for psychiatric injury, injury to feelings and aggravated damages.
Sema, which had not submitted any evidence or been represented up until that point, then asked for an extension of time to contest the compensation award.
The tribunal refused the request, and after a number of court hearings (which went as far as the Court of Appeal), it was withdrawn.
However, the Court of Appeal made clear that even though the company had not entered a notice of appearance in response to the original claim, that did not mean it could not appeal against the tribunal's assessment of compensation.
What happened next?
Mr Haddock then asked the employment tribunal to determine a number of factors relating to the assessment of his future loss, including the effect that the company's permanent health insurance scheme would have on his compensation.
Basically, the scheme said that, if Mr Haddock became permanently incapable for work, the employers could recoup up to 75 per cent of his salary from the insurers as long as certain conditions were fulfilled. This was not a contractual benefit as Mr Haddock could not enforce the policy directly against the insurer.
The tribunal said it had two options. The first, assuming that Sema continued to receive 75 per cent of his normal salary from the insurers, was to calculate his loss on the basis of 25 per cent of that salary.
The second was to base the calculation on his entire annual salary and to order Sema to pay a capital sum.
The tribunal decided on the second approach to avoid the possibility of Mr Haddock having to take action against the insurer in the event that the payments ceased (for whatever reason).
The company appealed against this, and Mr Haddock appealed on the basis that Sema had no right to take part in the proceedings because it had not entered a notice of appearance at the outset.
What did the EAT decide?
The EAT dismissed Mr Haddock's argument, saying that there was nothing to stop it from hearing the company's appeal against compensation.
It also said that the tribunal was wrong to decide that the lump sum compensation for future loss should not make any allowance for payments that Mr Haddock might receive under his employer's PHI scheme.
Although calculating future loss in personal injury cases (the essence of this case) is an inexact science, it said that there are certain rules that the courts have to follow. In particular, that payments made under an accident or health insurance policy to which the employer contributed (but not the employee) must be deducted when calculating an award for pecuniary loss. Otherwise the claimant would benefit twice - once from the employer and once under the policy.
The same deductions have to be made for someone claiming under the Disability Discrimination Act as a personal injury claimant. It made no difference that the payments were to be made in the future. As a result, the EAT concluded that the approach taken by the employment tribunal was incorrect.