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BLAIR PATERSON v. PETER KEIR PATERSON+ELISABETH PATERSON+TILLY CONFECTIONERY LIMITED


OUTER HOUSE, COURT OF SESSION

[2012] CSOH 183

PD1271/11

OPINION OF LORD WOOLMAN

in the cause

BLAIR PATERSON

Pursuer;

against

(FIRST) PETER KEIR PATERSON; and (SECOND) ELISABETH PATERSON AND TILLY CONFECTIONERY LIMITED

Defenders:

________________

Pursuer: Cherry QC and Thornley; Balfour and Manson LLP

Defenders: Jones, Solicitor Advocate; BTO Solicitors

30 November 2012

Introduction
[1] On 23 June 2008 Mr Paterson fell from a ladder at work. He sustained a serious injury to his right ankle. At the time he was employed as operations manager by Tilly Confectionery ("Tilly"). Tilly was founded by his parents about 15 years ago and incorporated shortly after the accident. In this action Mr Paterson sues both them and the company for negligence and breach of statutory duty. Liability is admitted, but it is agreed that Mr Paterson was 25 per cent to blame for the accident. I shall use gross figures throughout this opinion, from which the appropriate deduction in respect of contributory negligence requires to be made.

[2] There is a wide disparity between the parties' respective valuations. On behalf of Mr Paterson, Miss Cherry submits that the claim is properly quantified at £344,388. That includes a sum of £252,000 to represent loss of employability. On behalf of the insurers, Mr Jones argues that Mr Paterson is not entitled to an award in respect of loss of employability. He values the claim at £33,512. Even if loss of employability is included, however, he accords it a much lower figure than Miss Cherry. On that hypothesis, his valuation is £51,409.12.

Background
[3] Prior to his accident Mr Paterson was very active. He played badminton and squash, ran occasionally, and swam. His principal leisure pursuit was golf. From an early age he showed considerable aptitude for the game, becoming a member of the Scotland Boys Golf Coaching Squad. He competed in national and international events from the age of 16.

[4] After leaving school, Mr Paterson began a degree in sports science at Stirling University in 2001. He chose to study there because it had the best university golf team in the United Kingdom. He held a sports scholarship for his prowess at golf throughout his undergraduate studies. It was awarded to him by the university and the Royal and Ancient Golf Club. He was captain of the team that won the British Universities stroke play championship in June 2005. He finished third in the individual competition. Several of Mr Paterson's fellow team members are now golf professionals. His initial intention was to follow the same route. Mr Gordon Sherry, a well-known golfer, testified that he had the potential to do so.

[5] At the end of his first year, Mr Paterson switched courses and graduated with a BA degree in Business Studies in June 2005. From about the end of his second year, he began to spend more time working in the family business. He was interested in applying some of the efficiency strategies he had learned as part of his degree course. He joined Tilly on a full‑time basis shortly after graduation.

[6] Mr Paterson's mother had begun the business in 1997 by making tablet in the family kitchen. It took her about three months to devise the right recipe. That remains its core product, although it has added fudge and macaroon to its range. Tilly originally sold its products through a network of local stores. After obtaining its first supermarket "listing" in 1999, it now supplies branches of most of the major chains. They are its most important customers, representing 90 per cent of Tilly's current sales.

[7] When Mr Paterson joined the business in 2005, the tablet was made by hand. The workforce had grown from one to fifteen employees, almost all of whom worked on the production line. He reviewed all aspects of the business, including the recipes, production and quality control. He spent a year finding and sourcing new equipment at a cost of about £250,000, which enabled Tilly to make efficiency savings.

[8] Tilly was originally a partnership. It was incorporated on 7 August 2008 with Mr Paterson's parents as the directors and main shareholders. At the time of his accident, Mr Paterson was the operations manager. He became a director in 2009 and has a shareholding in the business. He regards himself as "the main man", because he oversees the whole business and takes the important decisions. That view is echoed by his mother, who describes her son as the driving force behind Tilly.

[9] Tilly's accounting figures show a positive upward trend. Its projected income is £1 million this year and £1.2 million next year. Those estimates are based on its recent accounts, which show the following figures:

Period Ended

Turnover

Net Profit

30 June 2007

£381,339

£52,616

30 June 2008

£416,216

£73,270

31 October 2009

£558,093

£105,821

31 October 2010

£569,744

£105,541

31 October 2011

£716,865

£116,885

In order to increase capacity, Tilly has moved premises twice and taken on more employees. It is now contemplating moving to a significantly larger unit. It has arranged finance to build a facility five times the size of the current premises to meet the projected demand for its products.

[10] Mr Paterson's own income is derived from a mixture of salary and dividend. His past and projected income figures are as follows:



Period Ended

Gross Earnings

Net Earnings

Dividend

5 April 2009

£18,720

£14,722.80

5 April 2010

£21,920

£17,047.40

5 April 2011

£22,880

£17,709.80

5 April 2012

£19,800

£15,707.90

£20,000

5 April 2013

£7,800

£30,000

5 April 2014

£7,800

£47,000

In due course he expects to be made the managing director and to earn over £100,000 per year.

[11] Mr Paterson wishes to retire at 67. He intends to remain with Tilly for the remainder of his working life and is keen to drive the business forward. Once the new factory is operational, he wishes to consider the export potential of overseas markets. They include the United States, China and Australia. In doing so, he aims to lessen Tilly's dependency on the UK supermarket chains. They are the only outlets that can provide volume sales within the United Kingdom. Accordingly, Tilly's contracts with them are vital to its continued prosperity. Loss of one listing would have a significant effect on the business.

[12] If Tilly does grow in the way that Mr Paterson hopes, he intends to employ more staff and to delegate some of his current tasks to them. In driving the brand forward, he aims to be the figurehead of Tilly. He is aware that in some countries, such as China, prospective customers like to see the family member who runs the company. That is an important element in building up business relationships.

[13] After he joined Tilly, golf remained a very important part of Mr Paterson's life. He practised every day at the golf range and played four or five times a week. Sometimes he played 36 holes on a single day; occasionally he did so on consecutive days. He continued to play at a high standard. He won various competitions and was selected for the county team. His talent was an asset to the business; it was an important networking tool. He played golf once or twice a month with business associates. That enabled him to have uninterrupted time with buyers and supply chain analysts. It gave him an opportunity to 'bend their ears'.

Medical Treatment
The Injury

[14] In the accident, Mr Paterson fell from a height of about 8 feet. His foot went through a rung of the ladder and twisted in the opposite direction to his leg. He suffered a comminuted fracture of the distal fibia, together with a tibial fracture and lateral displacement of the talus. There was also damage to the articular surface of the talus. Put short, it was a very significant ankle injury.

Surgery

[15] Mr Paterson has had four surgical procedures. After the accident, he was taken by ambulance to Stirling Royal Infirmary, where an attempt was made to treat the injury by way of open reduction and internal fixation. Subsequently, the surgeon told Mr Paterson on a ward round that his foot would point downwards and he should not expect to be able to walk or play golf normally again. He remained an in‑patient for two weeks.

[16] On discharge to his parents' house, Mr Paterson suffered major discomfort. The cast on his lower leg and ankle was very painful. He returned to Stirling Royal Infirmary to seek pain relief. It was discovered that the talus was in the wrong position to heal. Further surgery was performed to realign his ankle. He remained in Stirling Royal Infirmary for four days after this procedure took place. When he was discharged, he was told that an outpatient appointment would be given to him later in the year.

[17] The second operation did improve the alignment. But there was a still a slight lateral displacement of the talus, leaving Mr Paterson's foot in an equinus position (pointing downwards). That meant that he could not place his heel on to the ground and he had to put all his weight on to the front of the foot. He was also left with an increased risk of osteoarthritis.

[18] Mr Paterson was devastated to think that he would never walk or play golf normally again. As he had private health insurance, he decided to seek a second opinion. After making various enquiries, he arranged to see Mr Martin Klinke, a specialist in ankle injuries at the London Bridge Hospital. Mr Klinke recommended further surgery to treat the "dropped foot". On 10 November 2008, he performed an operation to lengthen the Achilles tendon to improve the function of the ankle joint. After the operation Mr Paterson was in plaster for six weeks. He was in plaster followed by an air‑boot for several months. He required to use crutches and received intensive physiotherapy.

[19] Initially the outcome of the procedure was good, but gradually Mr Paterson lost his range of movement again. Mr Klinke performed a second operation on 9 November 2009 to remove all metalwork and bone fragments from the joint. A large amount of scar tissue was resected. After the operation Mr Paterson was in plaster for four weeks. He was allowed to weight bear after a week and remained on crutches for about a fortnight after the plaster was removed.

Current Condition
[20] Mr Paterson's current position can be summarised as follows. He walks with a limp and can only manage walking for a maximum of one hour before his ankle becomes very painful. Going up and down stairs and walking on hard surfaces is particularly difficult. Standing is also a problem. After about 30 minutes, his ankle becomes stiff and hot. He struggles to carry items and can only drive short distances. He can no longer cut the grass. He is self‑conscious about the extensive scarring on his ankle and does not wear shorts. He finds air travel difficult, both in relation to sitting on board aircraft and walking within airports.

[21] The degree of pain he experiences varies. Some days his ankle is not too bad, other times it is "horrendous". He regularly takes Co-codamol and Nurofen for pain relief. Occasionally when the pain is severe he uses Oxycontin (an opiate). The drugs make him feel drowsy and he cannot concentrate.

[22] Mr Paterson can no longer run or play racquet sports. On the recommendation of his physiotherapist, he cycles once a month for about 15 minutes. He finds swimming painful. He does play golf once a week, because he is determined not to give up the game. But he finds it a struggle. After nine holes his ankle begins to be very painful. At the end of a round, he no longer socialises with his friends. Instead he immediately drives home in his car. His ankle is very painful the next day and he describes it like walking on glass. On some mornings he is unable to go into work.

[23] In relation to work, Mr Paterson estimates that since the accident he spends about 90 per cent of his time in the office and ten per cent in production "on the shop floor". That reverses the position prior to the accident. At large trade shows both at home and abroad, Mr Paterson is significantly hampered in what he can accomplish.

Future Treatment Options

[24] Mr Klinke outlined three options for the future management of the ankle. The first option is not to carry out any further procedure. Mr Paterson prefers this approach. He is reluctant to have another operation, because of the pain and discomfort he has already suffered. There is an increased risk of infection if he undergoes further surgery and that could lead to worse problems. The second option is a relatively minor operation to clear the extensive scar tissue at the back of the ankle joint in order to release the Achilles tendon. Mr Paterson has this option under consideration.

[25] The third option would be to carry out an arthrodesis. In the opinion of Mr Klinke such an operation would have a 90 per cent chance of achieving bone fusion. It would also have an 80 per cent chance of reducing or eliminating pain. By permanently fusing the ankle joint, however, Mr Paterson will lose movement in his right ankle. That would have a number of consequences. It would make it very difficult, for example, for him to descend stairs. He would also have problems driving and would probably require an automatic car or one with hand controls. An arthrodesis can have consequential effects on knees and toes.

[26] Another orthopaedic surgeon who also gave evidence, Mr Nutton, said that patients are rarely pain free after an arthrodesis. It is his view and that of Mr Klinke that it is preferable to wait as long as possible before carrying out the operation. It is a measure of last resort if all else fails and the pain levels become too high to bear. Should Mr Paterson elect to have a fusion operation, the recovery period is between three to six months. It then takes about a year to learn how to walk again in the absence of ankle movement. As well as the increased risk of infection, there is the possibility of more operations if fusion did not work.

Solatium
The Competing Valuations
[27] Both Mr Klinke and the employment consultant, Mr Peter Davies, said that Mr Paterson could be classified as disabled. Parties agreed that he sustained a "severe" ankle injury in terms of the Judicial Studies Board Guidelines (10th edition 2010):

"Injuries necessitating an extensive period of treatment and/or a lengthy period in plaster or where pins and plates have been inserted and there is significant residual disability in the form of ankle instability, severely limited ability to walk. The level of the award within the bracket will be determined in part by such features as a failed arthrodesis, regular sleep disturbance, unsightly scarring and any need to wear special footwear."

The range of suggested awards lies between £22,345 and £35,698, after applying an inflation factor of 1.09.

[28] Miss Cherry submitted that a higher award of £40,000 was justified in this case. She cited a number of authorities: McGhee v Diageo PLC [2008] CSOH 74; Gibson v Whyte 2007 Rep LR 50; McLean v Lothian & Borders Fire Brigade 1999 SLT 702. On behalf of the insurers, Mr Jones submitted that the proper valuation was £25,000. He referred to the following cases: Granville v Tonks [2006] CLY 3069; Blackwood v GD Bowes & Sons [1995] CLY 1759; Abbott v Pye [2008] CLY 2880; Harding-Greig v Wireangle Ltd [2004] 1 QR 12; Re Clark Kemp & Kemp 17-003; Everard v Unigate Dairies [1990] CLY 1670; Gibson v Whyte 2007 Rep LR 50. While I found these authorities of general assistance in determining the correct level of award, inevitably each turns on its own individual facts.

Decision

[29] In my view, Mr Paterson has coped well with his ankle injury and the level of pain that he continues to suffer. By means of appropriate adjustment and adaptation, he has continued to work in a demanding role and to play golf. In both respects, he has had a measure of success. He continues to manage a successful company and to play off a low handicap.

[30] But the injury has effected all aspects of Mr Paterson's life. He is no longer the fit and active man that he was. Although still a relatively young man, many activities and options have been curtailed or altered. He lives under the shadow of further surgical intervention, with no guarantee as to the outcome. He will never regain full function in his ankle and is at material risk of developing arthritis. The injury has had a significant psychological effect. He has had many low moments since the accident.

[31] In my view taking into account all these circumstances, an award of £35,000 for solatium properly reflects the profound effect that the injury has had on his life. Both parties agree that I should apportion half to the past for the purpose of interest.

Loss of Employability
[32] Mr Paterson remains in work and his income is increasing. He has not suffered any past or continuing loss of earnings. Because he may find himself out of work at some point in the future, however, he seeks a lump sum award for disadvantage on the labour market. Such claims are commonly known as Smith v Manchester awards after the case in which they were first discussed: (1974) 17 KIR 1. Such awards have been recognised in Scotland for some time: see Robertson's Curator Bonis v Anderson 1996 SC 217.

[33] In making a Smith v Manchester award, a great many factors come into play: Moeliker v Reyrole & Co Ltd [1976] 1 WLR 132 at 141B-142C, per Browne LJ. I approach the matter by asking the following questions:

a. What is the likelihood that Mr Paterson will find himself on the labour market before the end of his working life?

b. When is that risk likely to materialise?

c. What are his chances of obtaining a job if that occurs - would he be at a disadvantage compared with an able-bodied contemporary?

(a) A Substantial Risk?
[34] Before an award can be made, there must be a "substantial" or "real" risk that the claimant will lose his job. In Moeliker Browne LJ contrasted such a risk with one that is merely "speculative" or "fanciful" risk and continued:

"all sorts of factors will have to be taken into account, varying almost infinitely with the facts of particular cases. For example, the nature and prospects of the employer's business; the claimant's age and qualifications; his length of service; his remaining length of working life; the nature of his disabilities; and any undertaking or statement by his employers as to his future employment. If the court comes to the conclusion that there is no 'substantial' or 'real' risk of the plaintiff losing his present job during the rest of his working life, no damages will be recoverable under this head." (at 142C-E)

[35] In my view, there is more than a "fanciful" risk that Mr Paterson will not remain working with Tilly for the rest of his career. I reach that conclusion having regard to a number of factors. Over a period of almost 40 years, tastes may change. Consumers may cease to buy tablet, fudge and macaroon, or switch to rival products. Tilly may lose its listing with one or more of the supermarket chains. That could occur because a competitor's products are preferred, or if a health and safety issue arises with one of Tilly's products. Another contingency is the sale of the business. Mr Paterson's parents may choose to accept an attractive offer.

[36] While, however, I conclude that there is more than a speculative risk, I also hold that the risk is at the lower end of the range. Several factors point to Mr Paterson having a degree of job security. First, Tilly has passed the critical first five years, when there is a statistically higher risk of failure. It is now both well‑established and prospering. Secondly, Mr Paterson is the key figure within Tilly and he is committed to its long‑term success. Thirdly, Mr Paterson's parents show no wish to sell the company and if they did, they would involve him in the decision.

(b) When is the risk likely to materialise?
[37] Largely for the reasons given in the preceding paragraphs, it is my view that any risk is unlikely to occur for a significant period of time.

(c) What would be Mr Paterson's chances of obtaining a job?
[38] The third question also involves evaluating a number of uncertain factors. If Mr Paterson was looking for another post, then in my view his physical limitations would place him at a disadvantage by comparison with an able‑bodied applicant. At Tilly, matters have been arranged to accommodate his difficulties. A prospective employer, however, may be deterred from taking on Mr Paterson, because (i) he does not have full function, (ii) he may require time off for short‑term episodes of pain, and (iii) there is the question of further surgery, which may necessitate a lengthier period off work.

[39] Mr Paterson would contemplate three options if he found himself on the labour market. His preference would be to work for another similar food company as a national account manager. The other two alternatives would be to obtain work with Scottish Enterprise, or on the technical side with a major supermarket chain. Mr Paterson believes that he would encounter difficulties travelling to meet buyers at home and abroad, visiting factories with concrete floors and attending trade shows. These concerns were echoed by Mr Davies, who pointed to International Labour Organisation statistics indicating that someone with a disability is up to three times more likely to leave or lose employment than a fit person.

[40] Set against that is Mr Paterson's obvious aptitude for business. As his mother acknowledged, he is mainly responsible for Tilly's success and much of that has happened since his accident. I formed the view that he is highly driven and would push himself to succeed in whatever job he chose. His flair, experience and contacts mean that he possesses an excellent curriculum vitae. Prospective employers may place a premium on experience over formal qualifications. Further, Mr Paterson would consider acquiring further qualifications, such as an MBA degree, to improve his job prospects.

[41] In my view, taking all these contingencies into account as best I can, a loss of employability award is justified and I assess the appropriate figure to be £60,000. That lump sum award is based upon 18 months of notional earnings using a multiplicand of £40,000. That is derived from his current net earnings, taking into account the benefit of a car and an annual bonus.

Services
[42] Mr Paterson makes claims for services provided by his girlfriend, Heather Wells. They had been together for about two years at the time of the accident. Although they did not formally reside with one another, they spent about 50 per cent of their time together. After his discharge to his parents' house, she spent most nights and weekends with him. She explained that at that time, he was "in a dark place".

[43] Mr Jones did not challenge this head of claim, but an award can only be made if Miss Wells can be classed as a "relative". The Administration of Justice (Scotland) Act 1982. Section 13(1)(b) defines the term as follows:

"[a] person, not being the spouse of the injured person, who was, at the time of the act or omission giving rise to liability in the responsible person, living with the injured person as husband or wife."

[44] Although there are no authorities directly on point Miss Cherry helpfully referred me to the interpretation of similar provisions in other legislation. Section 3 of the Child Benefit Act 1975 includes a test based on the phrase "living with him". The Social Security Commissioner has held that it is not synonymous with "residing together", nor with "presence under the same roof". It involves, however, more than a transitory presence and more than merely spending nights at weekends under the same roof": Stroud's Judicial Dictionary 7th edition. In deciding whether one person is living with another as his wife or husband for the purposes of the Rent Act 1977, one assesses the manner in which the couple live together and their reason for so doing: Fitzpatrick v Sterling HA Ltd [2001] 1 AC 27 at 47H per Lord Clyde.

[45] I am satisfied that at the material time, Miss Wells was living with Mr Paterson. In my view there are several factors that point to that conclusion. They were in a committed relationship and spent a great deal of time together. Miss Wells provided assistance to Mr Paterson in a number of intimate respects. She helped him to go to the toilet, and with showering and dressing. In addition she cooked meals and carried plates and cups for him. She also drove him in the car. In general she helped him to build up his self‑esteem: Farrelly v Yarrow Shipbuilders Ltd 1994 SLT 1349 at 1351D-F. Particularly in the post‑operative periods these services were very valuable. Taking matters in the round, the quality of their relationship was such that it could in my view properly be characterised as being akin to a marriage: Ghaidan v Godin-Mendoza [2004] 2 AC 557, at para. [139]. The present case can be distinguished from Lawrie v Lanarkshire Health Board 1994 SLT 633, where the pursuer's girlfriend lived apart at the relevant time.

[46] Miss Cherry valued past section 8 services at £5,391. That was based upon Miss Wells providing services (a) for 20 hours per week from the date of the accident until three months after the surgery in November 2008; (b) for 15 hours per week for the five week period after the surgery in November 2009; and (c) for two hours per week to date. In each case she invited me to apply an hourly rate of five pounds. She valued future section 8 services at £15,678, again based upon Miss Wells providing two hours per week.

[47] With regard to section 9 services, Miss Cherry submitted that I should award £750 per annum for past and future services. She submitted that the total figure of £21,005 properly represented the value of the personal services that Mr Paterson can no longer render as a result of his injury.

[48] Mr Jones submitted that I should award £3,000 for past services and make no award for future services.

[49] In my view, the central fact is that Miss Wells spent time with Mr Paterson as her boyfriend. During the periods for which the section 8 claim is made, she was either studying at university or in employment. They chose to spend time together as a couple. Accordingly, I prefer to adopt a broad brush approach. I value the necessary services she performed for him in the past at £4,000. I shall allot £1,000 for future services.

[50] With regard to the section 9 claim, it is true that Mr Paterson is unable to perform various tasks, such as cutting the grass or lifting and moving furniture. But equally, it is not suggested that he has ever been a tradesman and he does not appear to have had a special interest or aptitude for DIY. I shall award £3,000 for past and future loss under this head.

Future Costs
[51] To date Mr Paterson has had 120 physiotherapy sessions. The cost has been met by his private medical insurance. He believes that he has now exhausted his entitlement and would have to pay out of his own pocket for any future sessions. Miss Cherry submits that a further 30 sessions of physiotherapy at a cost of £45 per hour would be reasonable, bringing out a figure of £1,550. Mr Jones suggested £1,000 on a broad brush approach. I have decided that £1,200 is the appropriate figure.

[52] Mr Paterson now requires to wear an orthotic insole in his right shoe. Currently he is on his second one. As they each cost £140, I shall award £280 for the two he has purchased to date. The insoles last for a period of three to five years, depending on wear and tear. With regard to the future, insoles will be necessary until the end of his life. I shall award £1,055.60. That figure is arrived at by taking an average replacement period of four years and using the lifetime multiplier for a 28 year old man (30.15 x 0.25 = 7.54 x £140). I reject Mr Jones' submission that no award should be made because Mr Paterson had worn insoles prior to the accident. There was no detailed evidence about this, but his previous insoles related to an arch problem, while the new insoles are required to support his heel.

[53] Mr Paterson's travel expenses in relation to his medical treatment are agreed at £1,500.

Final Arithmetic
[54] I shall put the case out by order to make the final calculations regarding interest and to make the appropriate deduction in respect of contributory negligence.