UK & Europe
Insurance & Reinsurance
In a unanimous decision the Court of Appeal has ruled that the High Court was incorrect in failing to award a Claimant no damages for a 'lost years' claim. The Claimant’s appeal was granted. The Claimant's income was found to be the product of his hard work and not the result of a passive investment, meaning that the Claimant could make a claim for loss of earnings in the lost years.
The Claimant, Mr Head, founded his own company, EMSL after working for the Defendant. Whilst working for the Defendant the Claimant was exposed to asbestos. He was later diagnosed with mesothelioma and pursued a claim for damages.
The Claimant had claimed over £4.4 million for ‘lost years’. The basis of such a claim is that a party is entitled to recover any financial losses they will suffer after their death if the accident / incident has reduced their life expectancy. Claims for 'lost years' commonly cover loss of earnings and loss of pension, although claims can be brought for all forms of lost pecuniary benefits.
In response to the claim, the Defendant had argued there should be no award at all, relying upon the case of Adsett v West. The principal issue was whether it was relevant that a significant part of Mr Head’s earnings, namely his dividend income, would continue due to the profitability of the company.
The trial judge agreed with the Defendant, and held that the principles of Adsett applied. The trial judge held that the profitability of the company was likely to continue after Mr Head’s death, and therefore, there was no loss.
The Claimant was initially refused permission to appeal but a further application to appeal was successful. The Claimant died after the High Court judgment and his widow was appointed to continue his appeal.
The Claimant submitted seven grounds of appeal, specifically:
The Court of Appeal found that the Claimant was entitled to succeed on his appeal grounds 2-7 and therefore it was unnecessary to consider the first ground.
The judgment highlighted the House of Lords decision in Pickett v British Rail Engineering Ltd  as "the foundation of the modern law." In this case it was held that "it would be grossly unjust to the plaintiff and his dependants were the law to deprive him from recovering any damages for the loss of remuneration which the defendant's negligence has prevented him from earning during the "lost years".
The Court of Appeal referred to the recent decision of Rix v Paramount Shopfitting Co Ltd noting that the facts were similar to the index case, although Mrs Head worked for the business whereas Mr Rix's wife did not. The court in Rix found the income earned by Mr and Mrs Rix was "the result of Mr Rix's hard work and flair" and it was not the case that the income at issue "was the investment return on a passive holding in a business, which would continue to yield the same income irrespective of the deceased's capacity for work."
In this instance, the Claimant was paid a modest salary by EMSL. It was accepted by the trial judge this did not reflect the value of his work and was fixed to be tax efficient. Lord Justice Bean found it did not make sense to say the salary was the full extent of the Claimant's earnings, and that the rest of his income from EMSL at the time of his death was, and would have continued to be, income from capital rather than earnings from work.
Lord Justice Bean agreed with the finding in Adsett that "the distinction properly to be drawn is between loss of earnings from work and loss of income from investments." All of the income that the Claimant and his wife received was as a result of his hard work and not a passive investment, with the Claimant being free to dispose of the income however he chose. The nature of a lost years claim "requires assessment of the value of the earnings or earnings capacity which the claimant personally has lost". The Claimant would have remained the driving force within the company but for his untimely death. He would have continued to work until 65, gradually reducing his working hours. Only once he finished work altogether would his income be entirely from investments.
The Claimant's appeal was therefore allowed with the case to be remitted for an assessment of the lost years damages claim.
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