Patrick Allen sums up the current approach to the discount or enhancement of damages
Assessing damages for future loss, particularly in catastrophic personal injury cases, is a complex exercise and has been the subject of much controversy over recent years.
The starting point is the principle of full compensation. The object of the award is to place the injured party in the same financial position they would have been in but for the accident (Hodgson v Trapp [1989] AC 807, [1988] 3 All ER 870).
Calculations
A claimant typically needs compensation for loss of earnings for their working life and the cost of care and other services until their death. An annual sum is calculated for these losses—the multiplicand. The number of years of losses is reduced to prevent overcompensation because a lump sum given to the claimant will be invested and yield a return. The correct sum is the amount where the capital and income from the lump sum is exhausted over the period of the loss.
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