MULTIPLIER THEORY

MULTIPLIER THEORY

Author : Gouri Kailash

INTRODUCTION

Tort means the violation of a person’s right by the negligence of the other or it is the breach of duty to another.

In Tort the compensation or damages are usually monetary damages. It is basically the sum of money that a person has to pay for the injury caused by the wrongful act done by him.

Compensation or damages are given to a person who suffers some injury, negligence caused by the wrongdoer. For instance if an employee is removed from a company without any proper notice or proper reasoning then the employee can ask for compensation from the particular company. Similarly if any injury has been caused to a person due to the negligence of others it is important to compensate or provide damages to them.

The aim of giving compensation or damages is to put the person who was injured back in the same position as if he were not injured by the wrongful act or tort.

This basically means that the person who is claiming the compensation for the loss (claimant) should be fully compensated in terms of money.

In order to clearly understand the term damages the following maxims can be studied:

• Damnum Sine Injuria – According to this maxim an actual damage has been caused to the person but there is no violation of his legal right and therefore he cannot go to the court to claim compensation or damages.

•  Injuria Sine Damno – Under this maxim no actual damage has been caused to the person however his legal right has been violated and therefore he can approach the court for compensation.

The different types of damages are:

• Liquidated Damages: These are the damages that are already fixed or predetermined and which have to be paid to the injured person. Such damages are usually seen in cases of contacts where the parties already know each other.

Illustration: A enters into a contract with B to sell certain goods to him for Rs 10,000. B says that if the goods are found to be defective then B shall file a case and A will have to pay Rs 10,000 to B. This is an example of liquidated damages as the amount is already pre- determined.

• Unliquidated Damages: These are the damages that are fixed by the court. Here the damages are not predetermined and the amount that has to be paid to the injured

person has not been decided. In torts unliquidated damages are usually taken because the parties usually do not know each other.

Illustration:

A trespasses into B’s property and B files a suit for trespass. Here A and B do not know each other and the damages have not been predetermined. Therefore the damages are fixed by the court.

Criteria for giving damages by the court are:

• The court will check the relationship between the plaintiff and defendant
• Whether the defendant was vicariously liable or not.
• The extent and nature of injury cause to the person.

DAMAGES IN TORT

The damages are classified into the following:

1. Nominal Damages : These damages are similar to the maxim Injuria Sine Damno where no actual injury or loss has been suffered by the person however his legal right has been violated. The damages given in such a case is very less as there is no or very less injury caused.

This can be studied in the case Ashby vs White where the plaintiff was denied his voting right but the candidate for whom the plaintiff was going to vote won anyways. The plaintiff then sued the defendant. The court held that even though no actual injury was caused the defendant had denied the plaintiff’s legal right to vote and therefore nominal damages was given as compensation.

• Contemptuous Damages: In this plaintiff has suffered an actual injury however the case is very trivial and it is a waste of time of the court. Therefore the court gives only a meager amount to the plaintiff as damages in order to show the court’s disapproval.

For instance in case of defamation the court is of the view that the person bringing the case already has a very low reputation and therefore such a defamation does not actually affect his already low reputation.

• Compensatory Damages: These damages are given to the plaintiff in order to restore his original position before the actual injury was caused. Such damages are not given to actually punish the defendant but to put the plaintiff back in the original position as if no loss or injury was caused by the defendant’s act.

Illustration:  A takes B’s car and damage is caused due to rash driving. Here B will be given compensation in such a manner that the car can be repaired.

• Aggravated Damages: These are the damages given to the plaintiff for the aggravated loss that he has suffered such as pain, low self-esteem etc. In such cases the normal monetary damages will not be enough. These are the extra damages provided to the plaintiff other than the compensation given for his monetary loss.

• Punitive Damages: The purpose of such damages is to give to the defendant as a punishment for his wrongful act. It is done in order to stop the others from committing such an act. Such damages are given to the plaintiff when the court feels the defendant’s act was severely gross.

CALCULATING THE DAMAGES

Damages when death of a person is caused

MULTIPLIER THEORY

It is not an easy task to allot the damages or give compensation to the injured party. The multiplier theory can be applied in cases where the death has occurred due to a wrongful act. According to this theory the multiplicand i.e. annual loss of future earnings is multiplied with the multiplier and the product will be the damages or compensation amount.

Where multiplicand = pre injury earning – post injury earning.

According to this method the person who is claiming should be given an amount which will yield sufficient interest to provide benefits of same standard that the deceased would have provided to his dependents had he been alive.

Basically by applying the multiplier method ensures that there is consistency and certainty and also prevents from different amounts being awarded in different cases.

There are certain limitations for this theory:

• No two cases will have same facts they can only be similar but not same therefore the multiplier used for various cases can only be similar. This is a limitation as it is decided in correspondence to the previously decided cases.

• Inadequate: Since the multiplier is in correspondence with the previously decided cases the amount calculated as the compensation or damages maybe inadequate.

Future enhancements can be considered while applying this theory i.e. the multiplier is decided based on certain factors such as:

1. The number of years the deceased could have lived.
2. The money deceased would have been earning had he been alive.

Other than that the economic status of the dependents could also be considered while deciding on the value of the multiplier.

United India Insurance Co.Ltd vs Bindu & ors ¹

The deceased person was driving a scooter when an accident happened by colliding with a tractor which was driven rashly and negligently. Here the court fixed multiplier at 13 and 6% interest.

1. ^{C.A No 724 of 2009 SC}

The other rule other that Multiplier theory is the Interest theory.

INTEREST THEORY: According to this theory the loss that the dependent suffered by the death of the person on whom he was dependent shall be calculated and then a lump sum of money will be paid such that when it is deposited it will give that much amount of interest which will be the sum that the court had determined.

Damages in case of reduction of life span

When by the wrongful act of the defendant the plaintiff’s life span reduces the compensation will not be given based on his social status. The damages awarded will be moderated and not according to the lifestyle of the plaintiff or his expectations.

CONCLUSION

Damages in tort mean monetary damages which are awarded to the plaintiff when some wrongful act is done by the defendant and injury or loss has been caused to the plaintiff.

There are different types of damages and they can be calculated in various ways. In case of death the damages are calculated in the following ways which are Multiplier theory and Interest theory.

Multiplier theory is one the one which is used extensively in case of death in torts. Certain modifications can be made in this theory in the sense that the factors that are considered while choosing the multiplier can be increased. However for calculating the loss the Court prefers this method.