NO LOSS ARGUMENTS IN CLAIMS UNDER THE FATAL ACCIDENTS ACT. who formerly provided support are governed entirely by statute.

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1 NO LOSS ARGUMENTS IN CLAIMS UNDER THE FATAL ACCIDENTS ACT 1 Actions brought by dependants for damages resulting from the death of a person who formerly provided support are governed entirely by statute. 2 The cornerstone for liability to compensate the dependants is contained in Section 3 of the Fatal Accidents Act 1976 (as amended): "In the action,... such damages may be awarded as are proportionate to the injury resulting from the death to the dependants respectively." 3 The injury or loss is, therefore, that of the dependant. That loss will be assessed on the basis of findings as to what the deceased person would have provided, but for his death, by way of pecuniary and/or non-pecuniary support taking into account a whole host of factors, including the likely duration and extent of any support. It might be thought from such wording that it would be safe to look at fatal accident cases in the same way as personal injury cases. 4 But it is not.

2 -2-5 Look first at what attention should be paid to what has happened since the death? If recent Court of Appeal authority is correct, very little. This is entirely opposite to personal injury cases. Is this right in principle? 6 The position is further complicated by the statutory disregard. At common law, subject to the customary exceptions, any benefit accruing from the death would normally have to be (and historically were) taken into account when assessing the dependency. This is to avoid the unfairness of double recovery. The principle is inapplicable under the statute. Since the coming into force of Section 3(1) of the Administration of Justice Act 1983, for all deaths occurring after 31 st December 1982, any remnants of the common law rule of deduction are entirely abrogated. In accordance with the recommendations of the Pearson Commission, Parliament enacted section 4 in the following terms: In assessing damages in respect of a person's death in an action under this Act, benefits which have accrued or will or may accrue to any person from his estate or otherwise as a result of his death shall be disregarded." 7 And so, it seems, the principle of double recovery cannot avail a defendant who seeks to argue that credit must be given for such benefits. If the object of the exercise were to put the Claimants in the position in which they would have been but for the death, this can only be seen as a windfall. 8 For more reasons than one, therefore, it would be very dangerous to assume that there is any correlation at all between assessment of fatal accident claim and

3 -3- personal injury claims. In COOKSON v. KNOWLES 1, and considering specifically the impact of section 4, Lord Diplock described the assessment of damages in fatal accident cases as having become "an artificial and conjectural exercise" whose purpose was "no longer to put dependants, particularly widows, into the same position in which they would have been had their late husband lived." The current editors of McGregor on Damages suggest that it is very doubtful that this discrepancy is a good thing. Is it likely that where grey areas exist, they will be resolved in such a way as to avoid double recovery or over generous awards? 9 To understand the problems further and to understand the context in which they arise, it will be helpful to consider separately the three most common types of dependency: dependency on income derived at least in part from some active participation by the deceased ( earned income ), dependency on services that did not provide an income and, finally, dependency on unearned income. 10 In WOOD v. BENTALL SIMPLEX LIMITED 2, the dependant widow and sons had been supported during the husband s lifetime by the income from the deceased's farming business. The claim was valued by the Court on the assumption that the deceased would have continued to work in the farm and the family had to give no credit for the income that they continued to derive from the business after his death. The Defendant had argued that there was no real loss because they still had the farm after his death. Beldam LJ, as well as Staughton 1 [1979] AC [1992] PIQR page 332.

4 -4- LJ, made observations about the nature of the dependency claim being made by the plaintiff. He said at page 342: "No aspect of the law of damages has been found in practice to be more dependant upon the facts of each particular case than the assessment of the loss of pecuniary benefit to dependants under the Fatal Accidents Acts. It is I think helpful to begin from certain underlying principles without regard to the current statutory provisions: The foundation of the claim is the dependants loss of future pecuniary benefit from the deceased; assets which the dependants were enjoying and of which they had the benefit during the deceased s lifetime and which they continue to enjoy after his death are not to be taken into account either as part of the dependency or as a deduction from it: see Heatley -v- Steel Company of Wales [1953] 1 WLR " And per Staughton LJ "before one considers deductions under Section 4, one first has to determine what loss the dependants had suffered; and if they have inherited the source of income upon which they were dependent, they have not lost it. In a case where the income was in part derived from labour and in part from capital, the Court would have to determine the loss and how much of the deceased's income was derived solely from capital which the dependants had inherited. In the present case, there was no adequate answer. If there had been evidence as to what the deceased was capable of earning without capital and if that had been less than his actual income from the farm, his Lordship would have been prepared to ascribe the difference to a return on capital which the dependants inherited and the award would have been so reduced; but there was no such evidence. The sums which the widow and sons were receiving did not show how much of the deceased's estimated income would have been derived otherwise than from his ability to work. There was probably some element of return on capital, but only a very small amount. 11 The case may be regarded as supporting the principle that if the deceased's income had been wholly derived from the capital value of an asset and if the widow had inherited just that same asset, there would have been no loss of dependency. This point is discussed further below. However, it may be interpreted more widely as suggesting that one can look more broadly at the question of loss (and justifying an apples and pears comparison).

5 -5-12 In CAPE DISTRIBUTION v. O'LOUGHLIN 3, the deceased had made his money in plant hire and had invested in a number of properties. At the time of his death, the contribution he made to the family finances was, in effect, to manage those properties and to develop and enhance his property portfolio. His wife inherited the properties and, for a while, she attempted to manage them as her husband had done before. She did not, however, have the aptitude to do so and she sold some of them and lived on the investment income from the proceeds. It was not suggested she had suffered any loss of income as a result of this decision. She claimed a loss of dependency and she recovered the cost of replacing the deceased's skills as a manager. The Claimant submitted that this approach was a justifiable and realistic way of answering the difficult question of the extent to which the dependants have been deprived of a reasonable expectation of pecuniary advantage from the continuance of the life of the deceased : see Pym - v- The Great Northern Railway Company (1863) 4 B&S 396. This was, it was argued, a question which does not predicate any particular approach, but requires a fair and reasonable assessment to be made which will be dependent on the facts of every given case. 13 This is a sensible result and a sensible approach. If the decisions are heavily fact sensitive, then the assessment will, it is to be hoped, reflect a fair assessment of the injury flowing to the dependents from the death. 14 It was argued on behalf of the Defendant in the Court of Appeal that there had been no loss at all or that any loss was minimal because the widow had inherited 3 [2001] EWCA Civ.178.

6 -6- the properties and they were still providing her with a good income. It was argued that by the Claimant framing the claim in this way, the Defendant had been deprived of deploying arguments as to the extent of any actual financial loss accruing as a result of the death. These arguments were rejected although Judge LJ did say that the approach was an unconventional one. The court may have found it repugnant (or, at least, contrary to the facts) to suggest that the deceased had been no more than a vehicle or conduit for an income return on capital. Giving the lead judgment of the Court Latham LJ said of section 3: This provision replicates, though not in precisely the same words, the basis upon which damages have been assessed since the passing of the Fatal Accidents Act The task of the court, in answering this question was originally the province of the jury. Neither successive statutes nor, any decisions of the courts lay down any prescriptive method by which such damage is to be identified, or calculated apart from the principle that it requires that some damage capable of being quantified. The first clear expression of this principle to which we have been referred is in the judgment of Erle CJ in Pym -v- Great Northern Railway Company, which I have already cited. However, in Taff Vale Railway -v- Jenkins [1913] 1 AC 1 the courts first recognised that a claim could be made in respect of services rendered gratuitously by the deceased. The main issue in that case was whether or not a dependant had to show that he or she was in receipt of a pecuniary advantage at the time of death. Their Lordships held that was not necessary. If a claimant had a reasonable expectation of pecuniary benefit in the future, that will be sufficient to found the claim. In that case the claim had been brought by a father for damages for the loss of a daughter aged 16 who was living with her parents and was nearing the completion of her apprenticeship as a dressmaker and was likely in the near future to earn remuneration which might quickly have become substantial. The jury had awarded 75. The claim was undoubtedly based mainly on the expectation of pecuniary benefit in the future. But the Lord Chancellor, Viscount Haldane pointed out that there was evidence that the daughter had come to her parent s house at night and given a assistance and also might have given assistance in her mother s greengrocers shop. He was clearly of the view that that could properly form part of the basis for the jury s award. The principle was clearly established by Scrutton J in Berry -v- Humm and Co [1915] 1 KB 627. When dealing with the nature of a claim for damages under the Fatal Accidents Act, he said at page 631: "It excludes compensation for injury to the deceased, or for the wounded feelings of his relatives, and is based solely on compensation for a

7 -7- pecuniary loss to the relatives, assessed either on the loss of such contribution in the past, or the loss of a reasonable expectation of a pecuniary benefit in the future, see the judgments in the Taff Vale Railway Company -v- the judgments in the Taff Vale Railway Company -v- Jenkins. I can see no reason in principle why such pecuniary loss should be limited to the value of money lost, or the money value of things lost, as contributions of food or clothing, and why I should be bound to exclude the monetary loss incurred by replacing services rendered gratuitously by a relative, if there was a reasonable prospect of their being rendered freely in the future but for the death. 15 The point was not taken by the Claimant that the benefit resulting from the deceased s death (the inheritance of the properties) was to be disregarded under the statute. Could it have been? The answer is, probably, No. The Claimant s Counsel had been prepared to accept, because it suited his case, that the principle in WOOD v. BENTALL SIMPLEX LIMITED 4, applied. This is because Mrs O Loughlin had inherited just the same property portfolio as had previously constituted her dependency, and so she could not accurately be said to have lost that dependency. The Court described as puzzling the Defendant s alternative contention that the case should really have been all about section 4 i.e. benefits, such as property that may be inherited, have to be disregarded when computing items of loss. But see below a case where a differently constituted Court of Appeal would have found the submission to be anything but. 16 In WELSH AMBULANCE SERVICES NHS TRUST v. WILLIAMS 5, the Court of Appeal upheld a very sizeable award in favour of the widow of a 49 year old businessman who had, with some assistance from his family, run an enterprise that included a builders' merchants business and several property interests. The 4 [1992] PIQR page [2008] EWCA

8 -8- lead judgment was given by Smith LJ. The fact was that despite the death of the patriarch in June 2001, the family had stepped into the breach and profits had increased. The defendant complained that the Judge had assumed that there was a dependency and having made that wrong assumption had then gone on, equally wrongly, to assess its value. The argument was given short shrift. It was irrelevant that the offspring may have made a success of the business. That was because it was irrelevant to the assessment of the dependency under Section 3. It was fallacious, according to Lady Justice Smith, to suggest that there was no dependency or no loss. It was plainly going to be the case that the deceased would have continued in his entrepreneurial way to do more and more for his benefit and for the benefit of the family business. The value was to beassessed by determining how much it would cost to replace those skills with another person capable of bringing those skills to bear upon the various activities engaged upon by Mr. Williams. In her words: Accordingly, in my judgment, Judge Hickinbottom was right when he held that it was irrelevant that David and Sarah had made a success of the business. That was not because the financial benefit which they had brought to the family was a benefit accruing as a result of the death which had to be ignored under section 4. It was because that financial benefit was irrelevant to the assessment of the dependency under section 3. He was correct when he said that nothing that a dependent (or for that matter anyone else) could do after the death could either increase or decrease the dependency. The dependency is fixed at the moment of death; it is what the dependants would probably have received as a benefit from the deceased, had the deceased not died. What decisions people make afterwards is irrelevant. The only post death events which are relevant are those which affect the continuance of the dependency (such as the death of a dependant before trial) and the rise (or fall) in earnings to reflect the effects of inflation.

9 -9-17 Is that right? Is it necessary to predicate such an approach? Must not the question be asked What if the business had in fact foundered with Mr Williams demise. One answer would be that the family would be able to recover their entire loss because that would represent the proper measurement of such damages. as are proportioned to the injury resulting from the death to the dependants respectively", using the words of the statute. To recover damages in this way could not surely be said to offend the principle that the dependency is fixed at the moment of death. We may need to look elsewhere to see whether that approach of ignoring post-death events, is in all cases sound. 18 The particular services on which this talk will focus are those reflected by the dependency of children on the services of a deceased mother and the dependency of an infirm or disabled person on the services provided by the deceased spouse or close relation. Establishing the fact of dependency will obviously be a question of past fact to be determined on the evidence. What did the carer do? The next question will be Would the carer have continued to provide some dependency beyond the date of death, to which the answer in the vast majority of cases will be yes. 19 But can it then be argued that in certain circumstances, there is no loss because the care that was being provided is not being replaced or that the services are being provided free of charge or by the tortfeasor. Or are such post-death events entirely irrelevant?

10 If the principle in WELSH AMBULANCE SERVICES NHS TRUST v. WILLIAMS is correct, the answer should be No to all three questions. It is irrelevant to look at who, if anyone, has now looked after the Claimant. The conclusion would always be that the dependency claim is the same regardless of how the Claimant has been or will be cared for whether by family and friends, by no one at all, by a Local Authority, or, as may happen, through state benefits funding a sheltered housing placement. The dependency, so the argument goes, is always the same: the value to the Claimant of the support which the Defendant has taken away. That should be valued, if the principle is sound, not by reference to any actual costs incurred, but by reference to the market value of the cost of a nanny or housekeeper or whatever may provide the best measure of the support that was being provided. It would be wrong to approach the claim from the stand point of a personal injuries action, as if the carer were carrying out noncommercial care and see how a Court might value recompense to her. Even if a Court were to consider that the carer ought to be paid on a notional basis for the equivalent of a certain number of hours in the day, the Claimant may have lost all the general services, that would be provided by an on hand residential carer. 21 If this does reflect the law, this would mean that there is at least the potential of a windfall for both Claimants and Defendants and, conversely, hardship for each. It is not the approach suggested in Kemp, where the learned editors suggest that the first question is how, if at all, the relevant services have been replaced since the death and how they will be replaced in the future. Thus claims should normally be approached by reference to the actual cost of replacing the services provided. Where the family has stepped in, the commercial rate will be taken, but subject to

11 -11- a Housecroft discount. If someone gas given up work to look after the injured person, then, if that decision was reasonable, then loss of earnings will be recoverable. In BAILEY v BARKING AND HAVERING AHA 6, cited in Kemp, it was decided that where a father had in fact given up his job in which his earnings were less than those of a housekeeper, only the lesser sum was recoverable. Whether this is right in principle, is highly debateable. 22 But what relevance has this to the no loss issue? In H v S 7, a divorced mother of 4 was killed in an accident after which the children s father had, with his new wife, stepped into the breach. The Defendant argued that the new parents were the only people entitled to benefit from the award and that since they would not receive a penny of it (because of animosity towards them on the part of the executors who brought the action), there should be no recovery. This was by extension of the reasoning in HUNT v SEVERS. 8 The Court went part way to accepting that argument. In the words of Kennedy LJ, The simple underlying truth is that in justice, the Claimant should not be compensated for the cost of services provided gratuitously if that compensation is not going to find its way to the service provider. It was held that: 6 THE TIMES July 22 nd [2002] EWCA Civ [1994] 2 AC 350 Where, as in this case, infant children were living with and were dependent on one parent, with no support being provided by the other parent, in circumstances where the provision of such support in the future was unlikely, and the parent with whom they were living was killed in circumstances giving rise to liability under the 1976 Act, after which the other parent (who was not the tortfeasor) housed and took responsibility for the children, the support that they enjoyed after the accident was a benefit that had accrued as a result of the death and, pursuant to s.4 of the 1976 Act, had to be disregarded, both in

12 -12- assessment of loss and in the calculation of damages. (2) However, such damages could only be awarded on the basis that they would be used to reimburse the voluntary carer for services already rendered, and would be available to pay for such services in the future. Such damages had to be held on trust and if the terms of the trust seemed unlikely to be fulfilled then the court had to take steps to enforce the trust. The damages to which NH and PH were entitled had therefore to be paid into an account to be held or otherwise dealt with as the court should direct 23 There, Kennedy LJ regarded the destination of the damages (and, therefore, of post-death events) as crucial. There, he was very much looking at post-death events. Moreover, he was treating section 4, which I will deal with shortly, as a bar to recovery, rather than a protection from deduction, just as the Defendant s Counsel had tried to persuade the court to do in CAPE DISTRIBUTION v. O'LOUGHLIN We need to consider again section 4 and the dicta in WOOD v. BENTALL SIMPLEX LIMITED 10 but before we do, it is helpful to look at a case where section 4 was properly applied. That was in the case of ARNUP v. WHITE 11. Following her husband's death in service, Mrs. Arnup received two large lump sum payments from the defendant, her husband's former employer. The first was a payment under a life insurance policy for which the defendant paid the premiums and which was intended to benefit all employees. Entitlement was not automatic and the defendant was allowed a (narrow) discretion in choosing the persons for whose benefit it should be applied. The defendant sought to argue that the existence of that discretion meant that it could not be said that the payment "accrued" "as a result" of the death. The second payment was a life insurance 9 [2001] EWCA Civ [1992] PIQR page [2008] EWCA Civ. 447.

13 -13- payment, paid under a policy that had been purchased by the Trustees of a Trust Fund set up by the defendant, in relation to the lives of a number of employees, of whom Mr. Arnup was one. Again, there was a discretion as to how the insurance monies should be applied and again the defendant sought to argue that the existence of that discretion meant that it could not be said that the payment had "accrued" "as a result" of the death. In the lead judgment of the Court of Appeal, Lady Justice Smith dismissed the defendant's arguments. The fact that both the death and the favourable exercise of the discretion led to the payment did not mean, from a commonsense point of view, that the payment had not accrued as a result of the death. Plainly, it had. Of course, had the payments not resulted from the death, how could the Defendant claim credit for them. 25 Returning to WOOD v. BENTALL SIMPLEX LIMITED 12, the question posed was this; A rich man with investments worth a million pounds and no other income is killed in an accident caused by a wrongdoer: can his widow both inherit the million pounds and also recover a very substantial sum for her dependency on her husband? Or suppose that the investments were held with a life interest for the husband and the remainder to his widow: does the same result ensue? The answer provided to the rhetorical questions was that such cases do not reach section 4 because no loss has in fact occurred. No financial loss has been suffered. 26 This principle was applied in AUTY v. NATIONAL COAL BOARD 13. Mrs. Popow's husband died at a colliery so that she became entitled to a widow's pension. It was argued on her behalf that she was entitled to damages not only for 12 [1992] PIQR page 332.

14 -14- loss of support during his natural lifetime but also for the widow's pension that she would have received under the scheme if her husband had survived to retirement and died thereafter. The answer was that Mrs. Popow's pension could not be said to be a sum which she would have received but can no longer receive because that flew in the face of the facts - she was in fact receiving the pension. Thus, she genuinely did suffer no loss. In that case, Oliver L.J. said, what was key in determining the answer to the question was not Section 4 of the Act but Section 3. What was the injury and how was the loss to be assessed? The answer was that there had been no injury because the claimant was receiving a widow's pension and could not complain that she had lost dependency on a widow's pension because she had not. What she was getting was the same as what she would have been receiving in due course in any event. She had been getting apples and was receiving apples. 27 But what where the deceased was providing apples and the dependents inherited pears? In the case of PIDDUCK v. EASTERN SCOTTISH OMNIBUSES LIMITED, the deceased had been a retired bank employee who was receiving an annual pension from the bank from which he supported himself and his wife. When he died, within five years of his retirement, his widow became entitled under the same pension scheme which had provided the previous benefit, to the payment of an allowance linked to her husband's pension. The argument that Mrs. Pidduck suffered no loss, because she was supported before her husband's death and afterwards from the same fund (albeit by different routes) was rejected. It was inaccurate to say that the support before the death was a benefit received 13 [1985] 1 W.L.R. 784.

15 -15- under the pension scheme with it being only a matter of historical accident or coincidence that the mechanism for that support was the husband's pension. The true position was that she had been dependent upon her husband who had been in receipt of a pension and that she suffered that loss with his death and that her subsequent allowance had to be left out of account. 18. To conclude, the law seems to be that in assessing financial dependency, time stands still with the death and so the fact that no loss may occur is irrelevant. Where the deceased had been actively involved in managing or nurturing investments that are inherited by the widow, it is strongly arguable that there is a real loss that is properly measured by reference to the cost of replacing those services. As for the widow who inherits the income generating asset as it is, there is probably no loss. The 64,000 dollar question, only partly answered by PIDDUCK is How different does the asset inherited have to be from the previous source of income in order for there to be no loss. If it is materially different, there will be a loss and the inheritance will not be taken into account under section 4. In cases where the dependency is on care, postdeath events are relevant. The distinction is not easy to justify in principle. The better course would be to look at each case on its facts, trying to avois true double recovery and remembering the words of Latham LJ; Neither successive statutes nor, any decisions of the courts lay down any prescriptive method by which such damage is to be identified, or calculated apart from the principle that it requires that some damage capable of being quantified.

16 -16- CHRISTOPHER MELTON, QC. July 22 nd Byrom Street Manchester M3 4PP and at 42 Bedford Row London WC1R 4JL

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