Mary Mulhall of Hugh James and John-Paul Swoboda discuss the recent  case of TDX v Raven Mount Services Company Ltd, where they acted for the Claimant, and provide some practice points in cases where you are suing a parent company.

At the heart of this case was one question, did the parent company (the Defendant) owe the deceased a duty of care in respect of his safety whilst at work? If they did then liability followed, it having been admitted that asbestos exposure was negligent and causative of the deceased’s mesothelioma. The case settled on favourable terms to the Claimant at about 5pm on the day before trial.

TDX, the Claimant, was the deceased’s daughter. The deceased also had an adult son, TSX, who suffered from profound disability. Prior to mesothelioma TSX relied entirely on his father, the deceased, for his many care needs. Because TSX lacked capacity the proceedings were anonymised.

The case arose from 18 months of exposure to asbestos in the construction industry during 1962/63 to 1963/64. The deceased was a labourer working next to carpenters sawing AIB and laggers. His employer, according to HMRC records, was a company known as Holliday and Greenwood (H&G) but no insurance could be traced. However, the deceased recalled working for Higgs and Hill (H&H), the predecessor in title to the Defendant, who were the parent company to H&G and who remain an active company. 

We argued that parent company liability arose because H&H’s parent/ subsidiary relationship with H&G was at the extreme end where the de jure difference of legal personality was, in practice,irrelevant. We argued H&G was controlled legally, administratively, and in practice by H&H; that key aspects of the business (e.g. costings, plant, stores, wages, consideration of accidents) where carried on by H&H as though H&G and H&H were a single commercial undertaking. Whilst H&G in theory had their own staff we argued the evidence suggested employees did not distinguish between H&H and H&G (with the deceased indicating he thought he worked for H&H). We said in light of the above H&H owed a duty to the deceased in respect of his work and his safety whilst at work.

Practice points

Our experience litigating this case has highlighted some practice points which we hope may be useful for practitioners considering bringing an action against a parent company.

Firstly, if the facts are right, one should be prepared to allege parent company responsibility/liability in any context. To put it another way although Chandler v Cape [2012] EWCA Civ 525 was concerned with parent company liability in an asbestos factory, and subsequent cases, such as Okpabi v Shell [2021] UKSC 3 (oil spills from pipes in the Niger delta)Lungowe v Vedanta [2019] UKSC 20 (Zambian copper mine discharge causing PI and property damage), are mass torts occurring overseas, there is no reason in principle why parent company liability may not arise in the construction industry (as alleged in this case) or in any other industry. Parent company liability provides an alternative route to establishing liability which may prove invaluable where the employer is dissolved and no insurer can be traced.

Secondly, parent company liability in the terms cast by Okpabi, Vedanta and Chandler is not the only route to establish parent company liability. The courts have, in recent years also described a concept known as “dual vicarious liability”. The Supreme Court in Various Claimants v Catholic Child Welfare Society [2021] UKSC 56) said this doctrine may apply where the employee “is so much part of the work, business or organisation of both employers that it is just to make both employers answer for his negligence.” A further doctrine of some assistance may be transferred employment/ borrowed employees. As described in Bowstead and Reynolds on Agency “An employee, X, may be in the general employment of A, but, as the result of arrangements made between A and B, X may be acting as the employee of B, so as to make B, and not A, responsible for X’s tort at the relevant time. The test is whether X is transferred, or only the use and benefit of X’s work, and this depends upon the extent to which A places X under the control and at the disposition of B.” Finally, of course one must not lose sight of the fact that many of the regulations relevant to asbestos litigation do not require a pre-existing relationship of employment but rather the relevant test is control or whether the sued person was an occupier (cf. McDonald v National Grid Electricity [2014] UKSC 53). Which legal doctrine is best suited ought to be determined by the evidence.

Thirdly, the mantra of evidence, evidence, evidence is key if a parent liability case is to be won. Whether there is sufficient intervention or control of relevant activities for a duty to be imposed depends heavily upon the contents of documents internal, or passing between, the subsidiary and parent (cf. para 44 of Lord Briggs’ judgment in Vedanta and para 129 of Lord Hamblen’s judgment in Okpabi). Where exposure to asbestos occurred decades previously documentary evidence is likely to be incomplete. That is not to say there will be no documentation but rather it will take determination to obtain such documents as still exists. Trips to archives (local and national), libraries, and the locality are de rigueur. Full company documentation from Companies House (subsidiary and parent) may be required. 

Fourthly, if you’re brining a case like this it may take a certain leap of faith at the outset. That is because the defendant (the parent company) may have much by way of disclosure but you probably will not get full disclosure until after issue and service and possibly (as happened in our case) disclosure will continue until the date of settlement. From a practical point of view this might mean needing to update the pleadings with the disclosure.

Finally, the level of intervention in the management of the subsidiary requisite to give rise to a duty of care is a “pure question of fact” (cf. para 44 of Lord Briggs’ judgment in Vedanta). The determination of that question of fact is dependent upon interpretation and evaluation of evidence by the judge. That means two things. Different judges can legitimately come to different conclusions. Second, and interconnect to the first, any appeal on a question of fact will be difficult. Accordingly, to win a case like this we think there needs to be a powerful and persuasive narrative as to why the parent ought to be held liable. 

Judgment was handed down on 3 November 2021 following a two-day assessment of damages hearing before Ritchie J in this unusual fatal mesothelioma claim where the applicable law was Scots law. Judgment for the First Claimant, Charmaine Haggerty-Garton (the widow), was given in the sum of £614,040. Dushal Mehta of Fieldfisher and John Paul Swoboda or 12 KBW represented the First Claimant and her three children.

The judgment can be found here.

An article provide more information on the facts of the case can be found here.

This claim was unusual as Scots law was the applicable law despite being tried in England. This gives PI practitioners north and south of the border a chance to consider what is the same and what is different in personal injury actions. There are two huge differences: awards of general damages for ‘loss of society’ for relatives and interest.

Loss of society is a head of loss completely unknown to English law which allows for a general damages award for close relatives who can establish a sufficient relationship with the deceased. In this case there were nine relatives who made such a claim. Five relatives (two daughter from a first marriage, two sisters, and a granddaughter) were joined into the action two days prior to trial and settled their claims one day prior to trial. The other four relatives were the widow Charmaine Haggerty-Garton and her three sons. Their loss of society awards for (a) distress and anxiety endured in contemplation of the deceased’s suffering, (b) grief and sorrow caused by the deceased’s death and (c) the loss of such non-pecuniary benefit as they may have derived from the deceased’s “society and guidance” fell to be determined by Ritchie J. He made an award of £115,000 for the widow Charmaine and awarded between £40,000 to £35,000 for each son. By contrast no general damages award would have been made under English law and there would have been a statutory entitlement to £12,980 for bereavement for the widow only. 

Ought the Scots law approach to be adopted in English law? There is certainly a case to be made but it is ultimately a question of policy as to whether English law should follow Scots law in allowing general damages claims for relatives when a loved one has died as a result of a tort. It is however undeniably the case that Scots law is more generous in the assessment of general damages for relatives in fatal cases and it is not wholly satisfactory that there should be such divergence between the Scots and English law on this issue.

The other huge difference between the approach under Scots law and English law is in respect of interest rates. Whilst English law interest rates languish at 0.025% in respect of special damages and 2% for general damages Scots law is much more generous with interest being claimable at 8% and 4% depending on the head of loss. Interest in this case amounted to over £40,000. It is inconceivable that anything like this amount would have been recovered under English law.

Two other points from the judgment may be of broader interest to PI practitioners. Firstly, in respect of the claim for loss personal services (equivalent to a services dependency claim) Ritchie J found the ONS paper “2016 Household Satellite account on household service work done through the UK” which provided a figure of £18,932 on the value of unpaid household service work undertaken per person was “helpful” but said he had difficulty in understanding what the survey meant. The extent to which this ONS paper (which suggests many services dependency claims have been undervalued where impressionistic awards were made) influences future claims is still a matter for debate (and future cases).

Secondly, the Court also had to consider what the appropriate award for Solatium (the Scots law equivalent to PSLA) was. This was a case where the deceased suffered terribly particularly towards the end of his life. He endured the symptoms of mesothelioma for some 13 months. An award of £97,250 was made confirming the trend that most awards in mesothelioma cases are likely to fall in the higher part of the JC bracket.

This post was written by Harry Steinberg QC.

Yesterday morning, little more than a month after the hearing, the Court of Appeal handed down judgment in Paramount Shopfitting Company Ltd v Rix [2021] EWCA Civ 1172. It is the latest in a series of decisions about how the courts should assess loss of income where mesothelioma hits a family business.

Facts

Mr Rix contracted mesothelioma as a result of the defendant’s negligence and died aged 60. He had been the founder and driving force of a successful joinery business. The judge, Cavanagh J, described him as a “… remarkably talented and dedicated businessman.” He and his wife held 80% of the shares between them and their two sons held the remaining 20%. The business consistently generated a gross annual profit of more than £300,000, but they retained most of the profit within the business to enhance its value. 

The family business continued to thrive after Mr Rix’s death and generated greater profits in the subsequent years

Mrs Rix claimed as his widow and dependant. She contended that her loss of financial dependency under s.3 of the Fatal Accidents Act 1976 was her share of the annual income to which they would jointly have been entitled had Mr Rix lived (basis 1). Alternatively, she claimed by reference to replacing the cost of his services to the business (basis 2). The defendant contended that there was no loss since the family business had been more profitable after Mr Rix’s death and she had inherited his shares and retained her own. 

The Judge’s decision 

The trial judge, presented with these alternatives, decided that there was a loss of dependency and held that basis 1 was the appropriate method of calculation. The business was not a ‘money generating beast’ and the income was derived from Mr Rix’s efforts – his skill and acumen – and not from a capital asset. 

Grounds of appeal

The Defendant was permitted to appeal on three grounds. First, the Judge was wrong to assess the loss of dependency by reference to all the profits which accrued to Mr and Mrs Rix without regard to whether those profits survived his death and continued to accrue. Secondly, the Judge was wrong to treat Mrs Rix’s shareholding as if it had belonged to Mr Rix. Finally, the Judge was wrong not to deduct Mrs Rix’s surviving income from her shares in the calculation of the loss. 

On appeal

The Court of Appeal unanimously dismissed all three grounds of appeal.

Nicola Davies LJ, giving the lead judgment, held that the earlier authorities, Wood v Bentall [1992] PIQR 332, Cape vO’Loughlin [2001] EWCA Civ 178 and Welsh Ambulance Services NHS Trust & Anor v Williams [2008] EWCA Civ 81, did not establish a principle that a business should be treated as a capital asset which will continue to produce a flow of income regardless of the death of the prime mover and driving force. 

On the facts, there was ‘no identifiable element of the profits which was not touched by the management of Mr Rix’. The loss was the income that would have been generated by Mr Rix’s services to the business, irrespective of the fact that the business retained the capital assets. It was therefore logical to treat the whole profit available to Mr and Mrs Rix as earned income and part of the financial dependency. Accordingly, there was no sound objection to basis 1 and the first ground of appeal was dismissed. 

The second ground of the appeal – that the Judge should not have treated Mrs Rix’s share as if it belonged to Mr Rix – was dismissed on the basis that it is established by authority that the Court must look at what the underlying reality of the situation. It appears, curiously, that the defendant relied on Ward v Newall [1998] 1 WLR 1722, which on the face of it seems to be directly contrary to defendant’s argument. 

The final ground of appeal was dismissed on the basis that the finding that the income of Mr and Mrs Rix – whether in the form of salary, dividends or profits – was wholly attributable to Mr Rix’s endeavours and earning capacity. This left no room for any deduction for income that would survive his death. Any such deduction would also contravene the principle that dependency is fixed as at death. 

Discussion

The outcome was a resounding success for the claimant and a decisive statement about how the Courts should treat claims of this type in the future. 

The decision is of considerable general importance. Where the injured party in a mesothelioma case has a fixed or regular income, the assessment of ‘financial dependency’ is essentially basic arithmetic. But, increasingly often, in cases such as Rix and Head v Culver (on remarkably similar facts), the loss is both more substantial and controversial. The central difficulty is how to disentangle that part of the profit which is derived from the residual value of the shares, which may be bound up in the company assets or intangible factors such as the goodwill and the existing customer base. 

The Court of Appeal recognised that, in principle, it is necessary to distinguish between loss of income derived from services and income derived from a capital asset. As Staughton LJ pithily put it in Wood, you cannot claim for the loss of the eggs if you have inherited the goose. 

But that principle, until now at least, has been difficult to apply. 

The Court of Appeal did not opt for the quasi-compromise position represented by basis 2 and the cost of replacing Mr Rix’s services (although, it should be remembered, the defendant rejected this approach too). Instead, the Court of Appeal tackled the question of how to assess this type of loss head on. 

Underhill LJ identified the problem with precision: 

“The real question is how that distinction works in the case of a small or medium-sized business with substantial assets, where the deceased (typically, but not necessarily, the founder) is not only the owner but the main person whose work and decisions generate the profits and thus the income which he takes out of the business and which the wife enjoys.” (para 76)

In a key passage, at para 60, Nicola Davies LJ answered the question as follows: 

“Income is only derived from capital if it is identifiable as having been received without the labour and services of the deceased. In short, it is passive.”

Underhill LJ found the answer lay in the old decision of Staughton LJ in Wood in which Staughton LJ held that, in assessing the loss in this situation, the court had to decide how much of the deceased’s was ‘derived solely from capital’. Applying this reasoning, Underhill LJ held: 

“I take that to mean that it is irrelevant that the capital has in one sense made the earning of the income possible.  The income is only “derived from capital” if it is identifiable as having been received without the husband’s services – in short, if it is passive.”   

Nicola Davies LJ, at para 54(iv), used the same language in articulating the core principles. 

The Court of Appeal has seemingly come up with a practical solution which is to give the injured party, rather than the tortfeasor, the benefit of the doubt. Valuable cases are rarely decided by the burden of proof, but if the only income that is it be deducted is that which is ‘derived solely from the capital’ then it rests with the defendant to prove that which falls into this category. 

This is consistent with (a) the Court of Appeal’s recognition that damages under the fatal accidents act may be greater than would be justified on a strict view of the dependants’ loss (para 54vi) and (b) the fairwind principle which gives the benefit of the doubt to the injured party where the tort makes the future uncertain. 

Samuel Cuthbert discusses the judgment of Master Davison in  Smith v W Ford & Sons (Contractors) Ltd [2021] EWHC 1749 (QB) which reasserts the convention that costs budgeting does not apply to cases in the Asbestos List. 

Background

There is a convention that cost budgeting is disapplied for cases in the Asbestos List. This is captured in the White Book commentary at 3DPD 5.3 as follows:

“The convention of dispensing with costs budgeting in asbestos disease cases has been reinforced by the introduction of PD 3E paragraph 2(b) which indicates that in all cases where there is limited or severely impaired life expectation (five years or less remaining) the Court will ordinarily disapply costs management.”

In this case, the Defendant had made an application to displace this convention and impose costs budgeting. Master Davison’s judgment, given ex tempore on that point in the course of the CMC, has wider application for cases in the Asbestos List.

The Judgment

Master Davison dismissed the Defendant’s application and dispensed with costs budgeting. The Master held that the convention that budgeting be dispensed with reflects the fact that matters typically need to progress very quickly in the Asbestos List. Both case management and final hearings are often listed comparatively soon after the issue of the Claim Form. Further, the Asbestos Masters do not distinguish between mesothelioma, asbestosis cases, and fatal cases for the purposes of listing. All such cases are listed for CMC very quickly, despite the differences in life expectancy in those categories of cases. Such listing arrangements cannot accommodate costs budgeting. 

Master Davison’s judgment takes the Defendant’s three arguments in turn. 

First, the fact that the case in hand was a deceased case was not significant. No distinction was made on that ground because of the administrative burden it would impose and its potential effect on living cases. 

Second, the fact that this case was a heavily contested trial was also not sufficient to take the case out of the ordinary. Heavy contest is characteristic of lots of asbestos cases, and the expert evidence in such case is also often complex. 

Third, in relation to the Defendant drawing attention to the benefits of costs budgeting across the board, Master Davison held at [9]:

“[…] these factors were considered corporately by the Asbestos Masters and by the senior judiciary who devised the present system and approved the convention that costs budgeting should not usually apply. The factors that are generally in favour of costs budgeting were judged to be subordinate to the factors that I have mentioned.” 

Two further observations were then made in relation to this. The Defendant had not produced any evidence to demonstrate that costs in asbestos cases are disproportionate or inadequately controlled. The Defendant could not therefore displace the convention of dispensing with costs budgeting. Moreover, Master Davison observed that QB Masers, Chancery Masters, and Costs Judges do not agree with the Defendant’s position that costs budgeting controls costs better. He did not recognise the Defendant’s dichotomy that imposing costs budgeting represents tight controls of costs in contrast to the ‘free-for-all’ that ensues without it. 

Comment

This is a notable judgment for asbestos practitioners. As is evident from the opening line of Master Davison’s judgment, it is handed down with the approval of the other Asbestos Masters. Its restatement of the reasons for the convention in favour of displacing costs budgeting in the Asbestos List may head off similar challenges in the future.

Master Davison held at [5] that the listing arrangements cannot accommodate costs budgeting and stated: “And I would add that they cannot accommodate too many debates, or contested hearings, about whether costs budgeting should or should not apply”. The Master’s comment at [9] that this hearing was not the appropriate forum for debates about “complex and somewhat sensitive” issues, speaks to the special considerations that underly the need for an Asbestos List. Practitioners need no reminding of the particular difficulties faced by litigators on this list, the existence of the ‘Show Cause’ procedure, expedited timetabling and case management by specialist Masters serve to meet these difficulties. It is hard to see how cost budgeting can be accommodated within this schema, it is suggested that the Master’s decision is therefore the right one.  

This blog post was written by Samuel Cuthbert.

Harry Steinberg QC and Kate Boakes – instructed by Peter Williams of Fieldfisher LLP – acted for the Claimant in Deborah Head (Executrix of the Estate of Michael Head, Deceased) v The Culver Heating Company Limited [2021] EWHC 1235 (QB). Johnson J re-assessed the lost years claim, following the Claimant’s successful appeal in the Court of Appeal earlier this year.

The judgment can be read here. Our blog post on the Court of Appeal’s judgment can be read here.

Background

In January 2021, the Court of Appeal overturned the decision of HHJ Melissa Clarke by which she held that Mr Head, a successful businessman who founded and ran a company called EMSL, could not recover any loss of earnings in the lost years because the profitability of his business would likely continue after his death and so too any divided income from his shares. The Court of Appeal set aside that element of her decision and ordered that the case should be remitted for a re-assessment of the lost years claim.

The re-assessment of damages was heard by Johnson J. By a judgment handed down on 11 May 2021, the Judge assessed damages for the lost years claim in the sum of £2.44 million. Accounting for the other heads of loss that were assessed by HHJ Clarke, the total judgment sum was £2.62M.

The decision

Johnson J was required to assess the lost years claim in accordance with the guidance of Bean LJ in the Court of Appeal.

The gulf between the parties remained enormous: the Claimant contended for a figure of £3.7M and the Defendant contended for a figure of £238,000. This difference was attributable to four key issues which the Judge had to determine.

(1) What fell to be included in the lost years claim? Was it limited to salary and dividend income? Or did it extend to retained profits insofar as these were generated by Mr Head’s work?

At paragraph 33 of the Court of Appeal’s judgment, Lord Justice Bean held that “at the time of Mr Head’s death all the income which he and his wife received from the company (save for the small deduction in respect of Mrs Head’s work) was the product of his hard work and flair, not a return on a passive investment.”

There was a dispute as to the meaning of this sentence. The Claimant argued that it was intended to mean that all of the income the Claimant was able to derive from EMSL, including those profits he chose to retain within the business, was recoverable as part of the lost years claim and there was no “investment income” element. The Defendant argued that the use of the word “received” meant that the recoverable element was limited to that which was actually extracted from the business and that the profits Mr Head retained within the business should be categorised “investment income” and offset against the loss.

Johnson J found for the Claimant on this point. He held that the effect of the Court of Appeal’s judgment was clear:

First, artificial distinctions should not be drawn between salary, dividends and undistributed profit. Bean LJ’s use of the term “loss of earnings” was not an exclusion of earning capacity that was reflected in the accumulation of funds otherwise than by payment of salary. Mr Head’s dividend income was not to be treated differently to his salary. Similarly, the term “dividend” was used in Bean LJ’s judgment to cover both dividend income and undistributed company profits. Mr Head’s earning capacity was not defined solely in terms of his salary or by reference to dividend payments, because he was the individual responsible for 90% of the profitability of the business. Had he been self-employed, his earning capacity would be assessed be reference to his net profit and the fact he chose to incorporate EMSL did not, as a matter of principle, make any difference to his level of earning capacity.

Second, Mr Head’s earning capacity, at the time he contracted mesothelioma, was best reflected by a combination of his salary and 90% of EMSL’s profits, less a deduction in respect of the work done by Mrs Head. This was an assessment made by HHJ Clarke at first instance and the Court of Appeal had not suggested that this element of her decision was in any way flawed.  

Third, once Mr Head no longer worked full-time, his earning capacity could properly be reduced pro rata.

(2) If Mr Head had not contracted mesothelioma, to what extent would he have worked less and/or handed over ownership of the company as he approached old age?

HHJ Clarke held that Mr Head would have worked at 80% rate from the age of 65 to 70 and at 50% rate thereafter. These findings were not disturbed on appeal. Johnson J held, following the guidance from Bean LJ, that Mr Head would have further reduced his input to 25% at the age of 75. Despite Mr Head’s evidence that he did not envisage ever fully giving up work, Johnson J found as a fact that he probably would have retired completely at the age of 80.

Johnson J accepted the evidence of Mr Head’s widow and son that he would not have drawn more money from EMSL than that which reflected the work he put in. He found that it was likely, as the years progressed, that Mr Head would have reallocated his shareholding to reflect his proportionately reduced involvement. This meant that there was no element of “investment income” to be taken into account – all of Mr Head’s income from EMSL would have been a reflection of his contribution to the business and was therefore earned income.

(3) Should the calculation of the lost years claim take into account rental income that Mr Head would have received from a property he had jointly owned with his widow?

This issue was not explored at the original trial and so there was no evidence on the point. It was possible that if the Defendant had relied on the rental income, then the Claimant may have sought to argue that a part of the rental income should be included in Mr Head’s earning capacity, thereby increasing the extent of the claim (e.g. if Mr Head had spent time and effort in the maintenance of the property). Johnson J held that it was not open to the Defendant to introduce an additional factor to the calculation of the lost years claim which had not been explored in the evidence.

(4) What deduction should be made for living expenses?

It was common ground that that Mr Head’s notional living expenses during the lost years should be deducted from his earning capacity, but not the extent of that deduction. There was a typing error in HHJ Clarke’s judgment which meant that the percentage deduction was too high. The Defendant contended that it was too late to change it. But Johnson J held that, rather than deducting a proportion of the income, it was appropriate to deduct the actual sum that reflected Mr Head’s living expenses. This was £3,584 per month. This deduction was to be made once overall – rather than year on year with any surplus crystalising as a loss – because the award was a single sum representing the whole of Mr Head’s earning capacity in the lost years less his total living expenses for the same period.

Consequential issues

Johnson J decided various consequential issues at a second hearing.

After determining some minor calculation issues, he assessed the lost years claim at £2.44 million. The overall judgment sum – including other heads of loss and interest – was £2.62 million.

There were two consequential issues which may be of wider interest.

• What rate of interest should be applied, and in respect of which components of the award?

The effect of the judgment was that Mrs Head ought to have been awarded £2.44 million in May 2019, when HHJ Clarke handed down her judgment. The Claimant contended that interest should be awarded on that whole sum at a rate of 8% (by analogy with the judgment debt rate) or alternatively 4%. The Defendant argued that interest should only be awarded on the past loss element of the award, at half the special account rate.

Johnson J held that he should apply the conventional approach, as set out in Jefford v Gee [1970] 2 QB 130, of awarding interest at half the special account rate. That rate was held to apply to past losses only, i.e. that part of the lost years claim that related to the period before judgment in the re-assessment of damages.

(2) What, if any, orders should be made under CPR 36.17(4)?

The Claimant made a Part 36 offer on 13 November 2020, before the Court of Appeal hearing, of just under £2.25 million in respect of all heads of loss, which she subsequently bettered. The Claimant sought an order under CPR 36.17(4) which should be refused only where the court considers it “unjust” to make such orders. CPR 36.17(5) sets out a non-exhaustive list of matters to be considered.

Johnson J considered each of the factors at CPR 36.17(5)(a)-(e) and held that none of those factors suggested that it would be unjust to order Part 36 consequences. However, he declined to make the orders on the basis that the Claimant introduced new evidence between the Court of Appeal’s judgment and the re-assessment of damages hearing. That evidence comprised a witness statement from Mr Head’s widow, son, and personal assistant, which resulted in a finding that Mr Head would have reduced his shareholding in the business to reflect the gradual reduction in his involvement. This benefitted the Claimant as it meant that the value of the claim was assessed on the basis that Mr Head would not have received income from the business beyond that which derived from his contribution. The Judge found that the earlier evidence before the court would not, in itself, have resulted in that finding, and therefore it would have been natural for the Defendant to question whether the offer was supported by the evidence as it stood at the time.

Comment

The decision on the lost years claim is bound up in the findings of fact. Johnson J, having considered the evidence in the light of the decision in Adsett v West, held that Mr Head’s income would have reflected his work and was not investment income. But the judgment serves as a useful worked example of how to quantify a lost years claim for a successful businessperson who is still working at the time of contracting a fatal illness.

In his judgment in the Court of Appeal, Bean LJ stated at [6]: “I consider that it was indeed necessary to reopen the determination of this appeal in order to avoid real injustice”. Before HHJ Melissa Clarke, the Claimant was awarded damages of c.£175,000 and nothing in respect of the lost years. The re-assessed damages now stand at £2.62 million. This serves to quantify the extent to which a real injustice has been avoided.

The Part 36 decision is also of interest. It could be argued that the Defendant was fortunate to escape the consequences set out in CPR 36.17(4). The determinative factor identified by the Judge appears to be one of the vagaries of litigation, where the Claimant produced supplementary evidence in response to the guidance from the Court of Appeal.

This post was written by Helen Waller.

An independent boarding school recently appealed a judgment on liability made against it under the ‘show cause’ procedure set out in CPR PD 3D. The claim was one made by a former pupil who had contracted mesothelioma as a consequence of his exposure to asbestos at the school. The mesothelioma led to the former pupil’s death in December 2020, a month after the show cause hearing. His widow continued the claim.

CPR PD 3D, paragraph 6.1 sets out the defendant’s obligations in the show cause procedure. A defendant is to “identify the evidence and legal arguments that give the defendant a real prospect of success on any or all issues of liability.” Following Silcock v H M Revenue and Customs [2009] EWHC 3025 (QB), that obligation only kicks in once the claimant has adduced credible evidence in support of his case.

The Background

The Claimant/Respondent had been a boarder at the school from 1969 to 1973, housed in a Victorian building. He said that 6 days a week he and other pupils dried their sports kit on asbestos-lagged pipes in the basement boiler room. His case was that the lagging was damaged and frayed. In respect of establishing the Defendant/Appellant’s knowledge of the dangers of asbestos and breach of duty, the Claimant/Respondent relied on the following:

1. A Department of Education memo, circulated to all schools in 1967, which stated that the inhalation of asbestos dust was known to cause asbestosis, lung cancer and mesothelioma.
2. The now well-known 1965 article in The Sunday Times which discussed the danger of exposure to asbestos.
3. A letter from a health and safety practitioner as a preliminary expert report, which stated that the pipes were likely to have contained asbestos.

The Defendant/Appellant submitted a preliminary report from an occupational hygienist.

The Master held that the school knew or ought to have known of the condition of the lagging, the risk of exposure to asbestos, and that the pupils were using the room. He held that the memo and the article meant that it would be fanciful for the school to maintain that it did not have concerns about exposure to asbestos, and that the school should have curtailed access to the boiler room in light of such concerns. Therefore, the Master concluded that the school had no realistic prospect of defending liability and that a breach of statutory duty was incontrovertible. Medical causation and assessment of damages remained to be dealt with at trial.

The Appeal

The appeal came before Cavanagh J. The school contended that the Master had applied too high a standard in deciding whether or not it had a “real prospect of success” in defending the case on liability. The school accepted that the lagging had likely contained asbestos, but argued that it had neither actual nor constructive knowledge as to the risks of asbestos at the time such as would place it in breach. It argued that asbestos had been used up to 1975, that contemporary publications had suggested that it had posed no health risk and that competing interpretations of what was known at the time should be a matter for trial.

The Judge dismissed the appeal. Drawing on Silcock, the Judge held that the test of whether the Defendant/Appellant’s case had some prospect of success that was not fanciful was a low bar. The procedure was inevitably rough and ready and often conducted without the benefit of full expert reports. It was held that the Department of Education memo should have put the school on notice of the risk. The Master had been entitled to conclude that it was not reasonably arguable that contemporaneous reports about the safety of asbestos present in buildings in an undisturbed state could have assuaged concerns. That conclusion was supported by The Sunday Times article from 1965. As a result, the Master had been right to find that the school ought to have taken reasonable steps to prevent exposure to the asbestos lagging and dust. Foreseeability was to be judged in the context of the state of knowledge at the time and the Master had been correct in his conclusion that the school would not be able to establish that harm had not been reasonably foreseeable. The school might not have known whether the dust swirling in the boiler room was chrysotile, but there had been a clearly foreseeable risk of injury. The school’s own expert did not exclude the possibility that the dust was chrysotile.

Comment

This is an important appellate judgment re-enforcing two key aspects of the show cause procedure.

Firstly, it is only a low bar that a defendant has to meet. However, the test is a clear one and the Masters are specialist asbestos judges. This case is a reminder that the Masters should approach these cases pragmatically and realistically. 

Secondly, the Masters regularly apply this test to incomplete expert evidence, but that is no bar to a finding of a defendant having no prospects of success. Defendants can often generate the semblance of a coherent argument, but once one takes a step back, it is clear that that argument is not one that stands reasonable prospects at trial. The procedure is necessarily rough and ready. It is designed to ensure, so far as possible, that dying victims are not deprived of the ability to live the short remainder of their lives with a modicum of financial security.

Introduction

John-Paul Swoboda and Spencer Turner instructed by Dushal Mehta of Fieldfisher recently represented a Claimant in a claim which involved the common law double actionability rule and the circumstances in which the “flexible exception” to the rule can apply.   

The claim was brought by the widow of Mr Haggerty in England. Mr Haggerty died from mesothelioma following exposure to asbestos in Scotland in the 1970’s. The Claimant’s position was that Scots law applied to the claim. If Scots law was found to apply to the claim, the Claimant could bring a claim for ‘loss of society’ under section 4 of the Damages (Scotland) Act 2011, which had the potential to substantially increase the value of her claim. Relatives unable to claim in English law would also be able to join the action if Scots law applied.

This blog post considers the principles relevant to the determination of the applicable law in this claim.  

Applicable Law and the ‘Double Actionability’ Rule

The applicable law in this claim fell to be determined by the common law double actionability rule because the alleged tort occurred before the Private International Law (Miscellaneous Provisions) Act 1995 and the Rome II Regulation came into force.

The origins of the English common law position are set out in Phillips v Eyre (1870) L.R. 6 Q.B. 1 in which Willes J stated that:

“As a general rule, in order to found a suit in England for a wrong alleged to have been committed abroad, two conditions must be fulfilled. First, the wrong must be of such a character that it would have been actionable if committed in England. Secondly, the act must not have been justifiable by the law of the place of where it was done.”

Willes J’s decision came to be regarded as requiring the existence of a civil liability for the harm done which was imposed by the law of place of the tort. However, any civil liability would only be actionable in England if the circumstances of the case, had they occurred in England, would have also given rise to an actionable claim in tort.

The House of Lords considered the applicable law rules in relation to torts committed abroad in the case of Boys v Chaplin [1971] A.C. 356. The majority of the court affirmed the general rule of double actionability as was stated in Phillips.

The rationale for the double actionability rule is twofold. Firstly, it seeks to ensure that a person should not be liable for something which is lawful in the place that it is done and secondly, to provide that a person who is given protection by the laws of one country is protected against legal proceedings in other countries.

The Exception to the ‘Double Actionability’ Rule

In Boys, Lord Wilberforce emphasised that double actionability was to be the general rule but it was not invariable and was subject to a “flexible exception” where the court considers it just to apply it. The exception provides that a particular issue between the parties may be governed by the law of the country which, with respect to that issue, has the most significant relationship with the occurrence of that issue and the parties. The exception was not precisely defined in Boys when Lord Wilberforce said that there was:

“great virtue in a general well-understood [double actionability] rule covering the majority of cases provided that it can be made flexible enough to take account of the varying interests and considerations of policy which may arise when one or more foreign elements are present.”

Boys arose out of a road traffic accident in Malta. The Claimant and the Defendant were both normally resident in England but at the time of the accident were stationed in Malta as members of the armed forces. Maltese law provided that general damages could not be recovered for PSLA. The question for the House of Lords was whether or not the Claimant could recover the general damages in his claim brought in England.

The House of Lords determined that, although the Claimant’s claim would fail under the general rule of double actionability, there were clear and satisfactory grounds on which to apply the flexible exception. Lord Wilberforce particularly emphasised the fact that the parties were both normally resident in England and that no policy or interest of Malta would be adversely affected by the application of an English rule in a claim brought by one English party against another.

The difficulty with the exception is that the court in Boys did not provide a set of firm guidelines for determining when the exception could be invoked.

The flexible exception to the double actionability rule was considered again by the Privy Council in Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 A.C. 190 (PC). In Red Sea Lord Slynn said that the exception could be invoked in cases in which the law of the place where the tort was committed was more significantly related to the case as a whole or to a particular issue than was the law of the country in which the action was brought.

The Court of Appeal further considered the exception in Pearce v Ove Arup Partnership Ltd [2000] Ch. 403 (CA). In that case there was a claim in respect of a breach in the Netherlands of a Dutch copyright which would not have been actionable if committed in England. The Court of Appeal said that “the plaintiff’s claim would be defeated if the court were to refuse to apply the exception. But the claim … is one where the English court would have given a remedy, under United Kingdom copyright law, if the facts alleged had occurred in England. This is not a case in which the claim is in respect of some wrong which is conceptually unknown in English law. In our view this is a case where … the exception to the double actionability rule enables the English court to apply Dutch law; and the English court ought to do so.”

In Sophocleous v Secretary of State for the Foreign And Commonwealth Office [2018] EWCA Civ 2167, the Court of Appeal restated the comment made by Lord Wilberforce in Boys, that there needed to be “clear and satisfying grounds” for the flexible exception to be applied. The Court of Appeal stressed the importance of the general rule and emphasised that the courts should not apply the exception readily.

Lord Hope in Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883 said of the exception that “unless a rigorous approach to this question is adopted, the application of the exception is at risk of giving rise to much uncertainty and to the criticism…that it has become instinctive and arbitrary”

The instant matter was listed for a preliminary hearing to determine whether Scots law or English law applied in whole or to any part of the claim.

The Claimant’s position was that there were clear and satisfying grounds for the Court to find that the applicable law to the claim was Scots law, arguing that:

1. The exposure took place in Scotland.

• The Damages (Scotland) Act 2011 provided for a significantly larger damages claim than under the Fatal Accidents Act 1976 and there was the potential for different family members to be compensated under different regimes which would be incongruous.

• A group of potential claimants in Scotland may have had their claims extinguished if Scots law did not apply to the claim. It would therefore be unjust to minimise damages by reducing what was recoverable to the lowest common denominator as between Scots law and English law.

• The stated goal of English law was ‘to fulfil foreign rights, not destroy them’, as per KXL v Murphy [2016] EWHC 3102 (QB).

The Defendant’s position was that:

1. The parties were domiciled in England.

• The consequences of the tort were and will continue to be experienced in England.

• The Claimant chose to sue in England rather than in Scotland.

The matter was set down for a preliminary hearing in the High Court to determine the applicable law. Shortly before the matter came before the court the Defendant accepted the Claimant’s position that Scots law should apply to the claim.

The case provided an interesting insight into the authorities surrounding the principle of double actionability and the flexible exception the rule. This case demonstrates that the common law rules are by no means obsolete. Given the majority of asbestos cases involve exposure before the Private International Law (Miscellaneous Provisions) Act 1995 came into force, it is not expected that this will be the last time that practitioners and the courts have to grapple with the issues which arose in this case.

This post was written by Samuel Cuthbert. It concerns the decision of the Court of Appeal in Head v The Culver Heating Co Ltd, which was handed down on Monday afternoon. The Court of Appeal overturned the decision of the High Court that the Deceased, a successful businessman, could not recover any loss of earnings because the profitability of his business would likely continue after his death and so any divided income from his shares in that business would survive his death. Mr Head was alive at trial but had sadly died by the time the case came before the Court of Appeal.

The judgment of the Court of Appeal can be read here.

Background

This was an appeal against the judgment of Her Honour Judge Melissa Clarke on the principal issue of what damages should be awarded for the Deceased’s ‘lost years’ claim, where the Deceased was the founder and managing director of his own heating and ventilation company, Essex Mechanical Services Ltd (“EMSL”). The Deceased was both paid a salary and received divided income on his shares in ESML.

At first instance

The Defendant relied upon Adsett v West [1983] QB 826in which McCullough J distinguished between earned income arising from a claimant’s capacity to work as recoverable in a ‘lost years’ claim, and income derived from capital surviving a claimant’s death which is not recoverable in a ‘lost years’ claim.

The Judge accepted the Defendant’s argument that the Deceased’s income was derived from his successful business and would not be lost. Accordingly, the judge valued this aspect of the claim at zero, in contrast to the £4 million which the Claimant sought. The Judge asked whether it was relevant for the purposes of a ‘lost years’ calculation that the Deceased’s dividend income from his EMSL shares would survive his death. The judge summarised her reasoning at [11]:

1. the principles of Adsett v West applied;
2. on the balance of probabilities, the profitability of EMSL was likely to continue after Mr Head’s death, therefore the dividend income from the shares that he and his wife held in EMSL was likely to survive his death;
3. this dividend income was greater than the ‘surplus’ income he enjoyed;
4. per Adsett v West, there was no loss in the ‘lost years’.

The Judge concluded at [70] that “the real distinction being drawn by McCullough J in Adsett v West is not between earned income and income from capital but from income which is lost on death and income which survives death”.

The Judge refused permission to appeal, as did Simler LJ on the papers. Following an application under CPR 52.30, which codified the principle set out in Taylor v Lawrence [2003] QB 528, the order refusing permission was revoked and the question was referred for determination by the Court of Appeal. Bean LJ, giving the lead and unanimous judgment, stated that:

“The overwhelming majority of Taylor v Lawrence applications are entirely unfounded but this one was a rare exception, perhaps the most striking one I have seen during six years’ service in this court.”

It was deemed necessary to reopen the determination of appeal in order to avoid “real injustice”.

On appeal

There were seven grounds of appeal. The first alleged that the decision was based on a misunderstanding of the expert accountancy evidence and a mistaken assumption that those experts had agreed that the profits of EMSL would continue undiminished after the Claimant’s death. Bean LJ found it unnecessary to resolve this ground in light of his judgment on the subsequent six grounds which are dealt with in concert.

Bean LJ accepted the position as set out in Adsett that the correct line to draw was between loss of earnings from work and loss of income from investments. Significantly, it was held, Adsett involved a claimant whose shareholdings and their respective dividend income had been gifted to him. Analogously, it was stated that had the Deceased retired prior to the onset of mesothelioma symptoms, the loss of earnings claim would be zero. However, it was accepted by HHJ Clarke that the Deceased was integral to the running of EMSL and that would have continued to be the case but for the mesothelioma.

The Deceased was paid a very modest salary which was fixed for tax efficiency and, as at [33], in light of the Deceased being the driving force behind EMSL “it made no sense at all […] to say that this was the full extent of his earnings from work.” As a matter of logic, all of the Deceased’s income from EMSL represented the fruit of his labours and not a return on an investment. The corollary to that is set out at [35] whereby Bean LJ recognises two points. First, at the point at which the Deceased would have stopped working full time, if he retained his shares in the company, his dividend income would be pro rata income on investments and not earnings from his work. Second, upon the Deceased stopping work altogether, any surviving dividend income would entirely constitute income on investments.

At [34], Bean LJ agreed with the Appellant’s submission that the nature of a ‘lost years’ claim was to compensate the earning capacity which had been personally lost by a claimant:

“Mr Head was free to dispose of that income in whatever way he chose. By contrast, as Mr Steinberg rightly observed, he could not make a testamentary disposition of his own future earning capacity. It was not necessary for him to be able to plead and prove what the cost of a replacement would be to EMSL: that would be to mischaracterise the nature of a lost years claim, which requires assessment of the value of the earnings or earning capacity which the claimant personally has lost.”

The Court of Appeal therefore set aside the Judge’s assessment of  the ‘lost years’ claim, and remitted the case for an assessment of damages before the Senior Master.

Comment

This judgment is hugely significant in directing the manner in which courts address quantification of the ‘lost years’ claims. There is now clear authority that a lost years claim should reflect the annihilation of the claimant’s future earning capacity by their illness.The earnings which the Deceased lost were not a return on any kind of investment in EMSL, but a reflection of his acumen, experience, skill and hard work. The value of that work was extinguished upon the Deceased’s death, and so falls to be recovered. The fact that EMSL may continue to make a profit in the future is immaterial to the personal financial loss which the Deceased suffered by reason of the mesothelioma.

It further represents a recognition of the fact that, for the purposes of ‘lost years’ claims, any quantification of income must fully embrace the economic reality of a claimant’s business structure. Distinguishing between salary and dividend income for such purposes does not appreciate that such lines are drawn for the purposes of tax-efficiency. Separating the two artificially and unfairly hives off income which was nonetheless the fruits of the Deceased’s labours.

The language used by Bean LJ at [6] is striking: “I consider that it was indeed necessary to reopen the determination of this appeal in order to avoid real injustice”. Such bold statements of fundamental principle are rare and speak to the significance of this judgment for both the Deceased’s widow and claimants more broadly.This judgment affirms that properly compensating a claimant for their loss of earnings in the ‘lost years’ requires close scrutiny and appreciation of which earnings are the fruits of their labours, and which are a return on an investment. Bean LJ highlights at [35] that Mr Head’s evidence regarding the involvement he would have continued to have in EMSL as he aged was accepted by the judge at first instance. Logically it must follow that the assessment of damages maps that evidence in compensating the Deceased’s estate.

Harry Steinberg QC and Kate Boakes – instructed by Peter Williams of Fieldfisher LLP – acted for the Appellant.

In this blog John-Paul Swoboda and his pupil Cressida Mawdesley-Thomas discuss the recent High Court decision of Mr Justice Cavanagh in Rix v Paramount Shopfitting Company Limited [2020] EWHC 2398 (QB).

Rix is the latest case to consider the width and breadth of section 3(1) of the Fatal Accidents Act 1976 (“FAA”), following in the judicial footsteps of Witham v Steve Hill Ltd [2020] P.I.Q.R. Q4 and AB v KL [2020] P.I.Q.R Q1. The issues determined in this judgment were twofold: did Mrs Rix have a valid claim for a financial dependency and if so, how should that dependency be valued. Mr Rix was a businessman with acumen, flair and drive but after his death, his son had stepped into his shoes and the business was even more profitable.

The judgment provides a useful reminder of important principles to be borne in mind when dealing with section 3 FAA claims: one looks at the practical reality when determining whether there is a dependency irrespective of tax arrangements which may be used in family businesses; income derived from capital is not a valid dependency as opposed to income derived from labour; the dependency is fixed at the moment of death which makes nearly all events after death irrelevant to the calculation of the dependency; the question of whether there is a financial dependency is a question of fact meaning there is no one single prescriptive rule to determine the amount of any dependency.

Background

The Claim was brought by the widow of Mr Rix who died of mesothelioma aged 60 having been exposed to asbestos whilst working for the Defendant as an apprentice carpenter / shopfitter in the 1970s. 

After his apprenticeship, the Deceased went on to establish what would become a highly successful limited company, combining a joinery, worktops, and kitchen and bathroom fitting business. The business was still expanding in 2015, shortly before Mr Rix fell ill.

The Deceased’s Business

At the time of his death, Mr Rix owned 40% of the shares in the company.  Mrs Rix owned 40%, and their sons owned 10% each. Mrs Rix’s shareholding produced dividends, and she drew a salary, although this was not to reflect her contribution to the business but was done on accountants’ advice as it was a tax-efficient way of taking money out of the business. After Mr Rix died, Mrs Rix inherited her husband’s shareholding, to own 80% of the shares. In addition to his income from the business, Mr Rix had two small pensions. 

The Judgment

Section 3 of the FAA reads:

“Assessment of damages:

In the action such damages, other than damages for bereavement, may be awarded as are proportional to the injury resulting from the death to the dependants respectively.”

The well-established meaning of this arcane language is that a dependant can recover damages if s/he has suffered pecuniary loss resulting from the death, and the pecuniary loss arises from a relationship contemplated under the Act (e.g. husband and wife).

Mr Justice Cavanagh considered the Court of Appeal authorities of Wood v Bentall [1992] PIQR 332 (CA); Cape v O’Loughlin [2001] EWCA Civ 178; and Welsh Ambulance Services v Williams [2008] EWCA Civ 81 and distilled the following principles (emphasis added):

• The question whether there has been a loss of financial dependency, and, if so, how much, is a question of fact;
• The courts will take a realistic and common-sense approach to these questions;
• There is no hard-and-fast or prescriptive approach to the determination, or quantification, of loss of financial dependency;
• There is a difference between an income-producing asset, such as a rental property or an investment, on the one hand, and a business which was benefiting from the labour, work, and skill of the deceased, on the other.   Where the value of an income-producing asset is unaffected by the deceased’s death, there is no financial loss or injury as a result of the death, and so there is no claim for loss of financial dependency in relation to it under section 3.  Where, however, the deceased worked in a business that benefited from his or her hard work, the dependants will have lost the value of that hard work as a result of the deceased’s death and so will have a financial dependency claim;
• The question whether a dependant has suffered a loss of financial dependency, for the purposes of the FAA, section 3, is fixed and determined at the date of death;
• It follows from the fact that the loss of financial dependency is fixed at death that, in a “work/skill” case, the existence of the right to claim loss of dependency, and the value of the loss, is not assessed by reference to how well the business has been doing since the deceased’s death;
• Moreover, a dependant cannot by his or her own conduct after the death affect the value of the dependency at the time of the death; and

Applying the above principles, it was held that Mrs Rix suffered a loss of financial dependency, notwithstanding that the business is more profitable than it was at the time of her husband’s death.  As in Williams, her husband’s business produced an income for the family which was the result of her husband’s skill, energy, hard work, and business flair.   Although she was a director and shareholder, the reality was that it was her husband, not her, who was responsible for the success of the business. At the time of her husband’s death, she had a “reasonable expectation of pecuniary advantage from the continuance of the life of the deceased” (Pym), because if he had lived his management of the business would have continued to produce an income for her.  O’Loughlin and Williams make clear that, as the value of the dependency is fixed at death, the health of the business after the deceased’s death is irrelevant.  In particular, Williams demonstrated that the existence of, and value of, a dependant’s financial dependency is not affected by any increase in profitability in the business.  

The Defendant argued that Mrs Rix’s interest in the business is, and was at the time of her husband’s death, akin to an income-generating capital asset because it continued to thrive after Mr Rix’s death. This argument was rejected.

“It is clear that, until very shortly before his death, Mr Rix remained the prime mover in the business.  He was primarily responsible for its health and prosperity, as a result of his flair, energy and hard work.  The business was still expanding, having just moved into new premises.  He was the person with the contacts and the know-how.  Jonathan was being groomed to take over, but this plan was still at a very early stage.  As Mr Phillips put it in his submissions, MRER was not a “money-generating beast” that would generate money regardless of who was in charge of it.”

The Defendant also sought to distinguish Wood, O’Loughlin, and Williams on the grounds that Mrs Rix was both a director and shareholder in the business and therefore her dividends and salary should be treated as her own, not something she received as a result of their financial dependency on the deceased. This submission was also rejected.

“The authorities have made clear that courts should look at the practical reality in relation to financial dependence, not at the corporate, financial or tax structures that are used in family arrangements. If one looks at the practical realities, it is clear that the income that Mrs Rix received as director and shareholder was entirely the result of her husband’s work for the business.”

Mr Justice Cavanagh found that the role of the court is not to compare the income of the dependant from the family business before and then after the deceased’s death, and to award the shortfall, if any. That would be illegitimate because dependency is fixed at death, cf. Williams.

The Judge therefore went on to consider the two methods of calculating dependency advanced by the Claimant. As dependency is a question of fact which should not be determined prescriptively, the judge had to determine which methodology was most appropriate. The Claimant’s primary case was that the dependency should be calculated by reference to Mrs Rix’s share of the annual income that Mr and Mrs Rix would have received from the business if he had lived (“Basis 1”). The secondary case was that her financial dependency should be quantified by reference to the annual value of Mr Rix’s services to the business as managing director, calculated by reference to the cost of employing a replacement (“Basis 2”). 

In Wood, Williams and O’Loughlin the Court had adopted Basis 2 to calculate the dependant’s financial dependency. However, it was held that the present case could be contrasted to those cases as the financial dependency claim in this case was concerned “only with income produced by Mr Rix’s labour, skill, energy and flair, not with income produced by his capital assets, or with income produced by a mixture of capital assets and labour.” On that basis Mr Justice Cavanagh made findings as to the joint income, having had the benefit of forensic accountancy evidence, before deducting 1/3 from the joint income to determine the dependency.

Analysis

Successive cases have now shown that the Courts will look at the practical reality of a family situation prior to a deceased’s death. What ‘the practical reality’ is in any given case is likely to be determined by evidence and, as a question of fact, by the judge’s disposition. This is most striking in one aspect of this judgment which, in the authors’ opinion, could easily be determined in a diametrically opposite manner and still conform with the principles to be applied to FAA claims. The finding in question is that the income of the deceased from the business was entirely based on his labour and not on the intangible asset of the business. Whilst this was consistent with the deceased’s own evidence it does not appear to be consistent with the fact that the business has been more profitable since being run by the son, who by all accounts was ill-prepared at the time of death. Whilst the deceased’s labour was no doubt needed to grow and maintain the business (to some extent) the fact that someone, not as experienced as the deceased, could step into his shoes suggests that the deceased had, at least to some extent, created a “money generating beast”, aka a capital asset. This is not to say that Mr Justice Cavanagh was wrong in his finding but simply to emphasis the point that finding in fatal accident claims are intensely fact specific.

Results such as this will cause disquiet among some as the Claimant has been left with more than she had lost and which runs contrary to the 100% principle which is so deeply ingrained in our (PI litigators) psyche. However, this is at least in part by design of section 4 the FAA (benefits following death are disregarded).

The most controversial, or perhaps unclear, aspect of this judgment is the actual calculation of the dependency. Firstly, the learned judge used 70% of the profit from the company as the joint income (relying on expert accounting evidence) in preference to the much more familiar cost of replacement services. This approach was justified by the finding of fact the business generated profits because of the deceased’s labour, not accumulated capital, and in this way Williams, Wood and O’Loughlin were distinguished. This might be said to add an inadmissible element of guesswork to the determination of loss (though without reference to the accounting evidence this is not easy to determine). Secondly there was no deduction from the joint income to reflect the amount paid to Mrs Rix from the company (save for rental income which was agreed to be income from a capital asset). This appears incongruous with the fact she was actually paid a salary and received dividends from the company, though does perhaps reflect the reality, as found, that she was no more than a straw partner in the business. Finally, a 1/3 deduction was made (by agreement), presumably to reflect living expenses (though this is not clear), even though the judge had found that a 17.5% deduction would be appropriate for living expenses if the alternative basis were used to calculate the dependency.

This post was written by Megan Griffiths.

The High Court has recently found for a claimant who was exposed to asbestos at work in the late 1950’s and 1960’s in Smith v Secretary of State for Transport [2020] EWHC 1954. The key issue in dispute was whether his exposure met the requisite threshold for a diagnosis of asbestosis: the threshold being 25 fibres per millilitre per year (“fibre years”). The judge considered Mr Smith’s lay evidence on his daily duties, documentary evidence of his employer’s use of asbestos and expert evidence on the likely levels of exposure to find that it did.

Background to claim

Mr Smith was employed by British Rail from 1956 to 1963. His work involved repairing train carriages and he alleged that he was regularly exposed to asbestos dust in the course of this work. His case was that this exceeded 25 fibre years meaning he now suffered from asbestosis. He claimed that the Defendant had breached its statutory duties under the Factories Acts to take all practicable measures to protect its employees against inhalation of substantial quantities of asbestos: s.47 of the 1937 Act and s.63 of the 1961 Act [15-16]. His secondary claim in negligence did not add to the matters in issue [17].

The Defendant denied that Mr Smith’s exposure met the fibre years threshold for asbestosis. It did however accept that if the court found Mr Smith did meet the threshold, it was in breach of statutory duty [16]. Subject to liability, quantum was also agreed.

The liability only trial took place over Skype in June 2020. Live evidence was heard from the parties’ expert occupational hygienists, with Mr Smith’s oral evidence having been given on commission in October 2019.

There were three key issues that the court decided upon at trial, with the latter two pertaining to liability.

Issue one: how should the court approach Mr Smith’s evidence, given that he suffered an stroke in 2001 that had impacted his ability to communicate?

Mr Smith gave the only first-hand evidence of his daily working habits and exposure to asbestos, in two witness statements and the evidence on commission. However, he had communication difficulties as a result of a stroke in 2001 which were apparent from the video of his evidence on commission, at one point saying “I can’t talk properly” [38]. Thornton J was concerned as to how to properly approach his evidence and asked both counsel to agree a summary of the relevant principles from the case law which is set out at [40] of the judgment. The principles are applicable to all witness evidence and helpful reading for any litigator considering how their witness’ evidence of historic events will be interpreted at trial.

Thornton J bore Mr Smith’s particular difficulties and those principles in mind when assessing his evidence. She mentioned in her judgment that having access to the transcript as well as the video of the evidence on commission was “particularly useful” in his case [43].

Issue two: to what extent was Mr Smith exposed to asbestos in the course of his work?

It was agreed that Mr Smith was exposed to asbestos when his colleagues removed ceiling panels in the carriages which released asbestos dust [8]. Documentary evidence of British Rail’s use of asbestos at the time suggested that at least some of the carriages contained high concentration blue asbestos [9]. Mr Smith did not remove the ceiling panels himself and the extent to which he was actually exposed to the asbestos dust was disputed [10].

Thornton J carefully considered Mr Smith’s evidence on the nature and levels of his exposure. She took Mr Smith’s known communication difficulties into account when coming to a view on the credibility and persuasiveness of his evidence (for example, [50 and 73]).

Although the judge acknowledged that there were some inconsistencies following cross examination, they were by no means fatal to Mr Smith’s evidence which was ultimately “clear and consistent” on the issue of his exposure [73]. In particular, Mr Smith gave unchallenged evidence of chunks of blue dust falling onto him and the floor during his work and staying there until the end of the job which supported his case [45].

Mr Smith’s evidence alongside the documentary evidence of asbestos use at that time by British Rail and the expert evidence, led Thornton J to find that Mr Smith had been exposed to asbestos dust “on a regular basis” [76].

Issue three: did that exposure meet the 25 fibre years threshold required for a diagnosis of asbestosis such that his claim succeeded?

The experts agreed that if Mr Smith’s exposure met the threshold of 25 fibre years then the correct diagnosis was asbestosis in accordance with the 1997 Helsinki criteria [2 and 11]. Therefore, the issue for the court was whether this had been met on the facts, using the experts’ estimated calculations to inform that decision [31 to 34].

Having accepted Mr Smith’s evidence on the nature and extent of his exposure, Thornton J adopted Mr Smith’s expert’s mean concentration figure to find that he was exposed to 20 to 100 fibre/ml on a regular basis and that, on the balance of probabilities, his total exposure was over the diagnostic threshold [82].

Comment

Mr Smith’s success is encouraging for claimants in historic asbestos exposure cases. This was a case where the only evidence of his daily work was from the claimant himself, without statements from colleagues or other ex-employees. Additionally, Mr Smith had communication difficulties to overcome in giving a clear account of events over 60 years ago. Notwithstanding these challenges, the judge was able to form a clear view of Mr Smith’s evidence in his favour, no doubt thanks in part to the work of his legal team in preparing clear and convincing witness statements.

Whilst the circumstances giving rise to Mr Smith’s communication difficulties are somewhat unusual, many claimants in asbestos cases are elderly and may well have unrelated communication difficulties that need to be taken into account. The passing of long periods of time and/or individual communication challenges will not prevent the right claimant from establishing the exposure required to succeed in a claim against their ex-employer, like Mr Smith was able to in this case.