Effect of High Foreign Tax on Damages

Van Oudenhoven v Griffin Inns Ltd (CA TLR 10 April)

The same court as in Warren v Northern General Hospital Trust (above) reversed the decision of the trial judge and held that in a claim for damages for personal injuries involving future loss of earnings, the fact that a foreign claimant would be liable to pay tax in his own country at a higher rate than that to which a UK claimant would be subject, did not of itself make the case an exceptional one so as to justify reducing the discount rate applicable or increasing the multiplier. Calculations showed that applying UK tax, the fund would be exhausted just over three years before the end of the 34-year period to the claimant’s assumed retirement age, whilst applying Dutch income tax the fund would be exhausted about three years earlier. To make up the difference of about £50,000 would involve an increase in the multiplier of about 7% to 22.5. In addition there was currently in force in Holland a wealth tax. The net rate of return on index linked Government securities in England would be more than 3%, therefore a discount rate of 3% would be more than adequate. The court was told that Dutch rates of taxation were likely to be reduced but in any event although the return taking account of Dutch taxation would be less, it would not be substantially so. The return would fall within the range contemplated in Wells. In addition it was far from clear that the wealth tax currently in force in Holland applied to an award of future lost income, and in any event the court was told that that tax was likely to be abolished in January 2001. The claimant had failed to show that her case was exceptional.