UK: Guidance Given On Calculating ‘Lost Years'

Last Updated: 5 June 2019
Article by David Wynn

In a judgment favourable for defendants the High Court sets out the issues to be considered when determining the 'lost years' entitlement, with the most important point being that the real distinction to be drawn is not between earned income and income from capital, but from income which is lost on death and income which survives death.

A claimant 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. When assessing the claim, the court will attempt to put the claimant back into the position he would have been but for the accident and will therefore make appropriate deductions for living expenses.

Background

The Claimant was diagnosed with mesothelioma in March 2018, which was contracted in the course of his employment with the Defendant. Heads of damages were agreed save for general damages and loss of income in the 'lost years'. At trial the judge, HHJ Clarke, assessed general damages at £95,000 leaving the value for the 'lost years' to be determined.

The Claimant valued his claim for loss of earnings in the 'lost years' at £4,421,683 whereas the Defendant's valuation was nil.

When this case reached trial the Claimant was 60 years and 8 months old and managing director of his company Essex Mechanical Services Limited (EMSL), in which he, his wife and their three adult children were joint shareholders.

The Claimant's wife and two sons were employed by EMSL. Prior to his diagnosis, the Claimant had decided to reduce his involvement, with his sons' responsibilities increasing, and his eldest son to eventually take over as managing director. It was agreed by the parties' forensic accountants that EMSL would continue to be successful after the Claimant reduced his involvement and the profitability of the company would likely not diminish.

The issue

HHJ Clarke stated that the main issue to be determined was whether it is relevant that: "in arriving at the 'lost years' calculation a significant part of the Claimant's earnings, namely his dividend income from EMSL shares, is likely to survive his death".

The Defendant relied upon the case of Adsett v West [1983] QB 826. In Adsett the judge stated that by way of a 'lost years' claim a claimant could recover income arising from their incapacity to work but could not recover income derived from capital which survived the claimant's death. The Claimant sought to distinguish the case of Adsett by submitting that his lost earnings are not a return on any investment in EMSL, but a "reflection of his acumen, experience, skill and hard work" rather than as in Adsett "the investment return on a passive holding in business, which would continue to yield the same income irrespective of his capacity for work."

The judgment

HHJ Clarke found in favour of the Defendant stating that the Claimant's Counsel had a "misunderstanding" of the reasoning in Adsett, and assessed the Claimant's claim for the 'lost years' at nil.

It was noted that "In my judgment it is clear that McCullough J [in Adsett] is ignoring income which survives death when approaching what he sets out as a two-stage process. The first step is calculating the surplus, i.e. the earnings or earning capacity which are lost on death less the living expenses which would have been spent in life but are 'saved' in death. However, he necessarily takes the income which survives death into account in the second stage of his reasoning, i.e. whether there is an overall loss in the lost years when the income which survives death is taken into account."

HHJ Clarke accepted that the principles of Adsett applied and stated "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."

After death, the Claimant would lose his salary but, on the balance of probabilities, the dividend payments would still be paid and would not reduce as the business would continue to run and function.

The Claimant's living expenses were to be deducted from his whole income but then offset against that loss the part of the income which survived post death. The Claimant's total annual income less living expenses was less than the dividend income that would survive post death, and as such, per Adsett v West there was no loss in the 'lost years' and therefore no claim that could be made.

General damages

The Claimant valued general damages at £95,000 whilst the Defendant's valuation was £80,000. Claimant's Counsel submitted there were a number of aggravating factors that should be considered: the Claimant's relatively young age; his great loss of life expectancy; the illness, his suffering and treatment to date. These were accepted by HHJ Clarke and she agreed that the Defendant's valuation was too low. Noting that the Claimant was "likely to have the worst of his pain, suffering and loss of amenity to come" she awarded the £95,000 sought.

What can we learn?

  • This case has reinforced the decision in Adsett in that a claimant is unable to recover income derived from capital which survives the claimant's death.
  • Had the Claimant's family made a dependency claim after the Claimant's death under the Fatal Accidents Act 1976 the continued success of EMSL would have been disregarded and consideration given to the cost to the company of replacing the Claimant as manager.
  • When calculating the award for general damages it was important to take into account the Claimant's awareness that his life expectancy had been reduced, pursuant to s1(b) of the Administration of Justice Act 1982.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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