In Head (deceased) v Culver Heating Co Limited, the Court of Appeal has provided useful guidance on the valuation of a lost years claim and reasserted that a distinction is to be made between loss of income due to reduced capacity for work and loss of income from investments.
As a young man in the 1970s and 1980s, Mr Head was exposed to asbestos while working for Culver Heating Co Ltd. He later became the founder and managing director of a successful heating and ventilation company. In December 2017 he began to experience symptoms of mesothelioma. He brought a claim for damages against Culver Heating Co Ltd and his damages were assessed at a trial in April 2019.
The principal issue at trial was what damages should be awarded for Mr Head's ‘lost years’ claim – Mr Head sought an award of £4,421,683 but the defendant argued that there should be no award at all. It was submitted that a ‘significant’ proportion of the claimed losses were derived from investments (90% shareholding in a ‘multi-million pound turnover’ business), which were likely to survive Mr Head’s death. The judge accepted the defendant’s submissions and valued the lost years claim at zero on the basis that Mr Head’s dividend income from his shareholding would continue beyond his death.
What is a ‘lost years’ claim?
This type of claim may be made by a living claimant whose life expectancy has been reduced because of the defendant’s negligence. The loss of life expectancy is determined by medical evidence. The claimant is entitled to recover damages for his/her financial losses (loss of earnings/loss of pension/loss of company car) throughout both the period that s/he is likely to remain alive and also for the ‘lost years’ during which s/he would have lived but for the injury or disease. The lost years damages are assessed after deducting the claimant’s own living expenses which would have been incurred during the lost years.
The Court of Appeal’s decision
Sadly, Mr Head died following the initial trial and his widow was appointed to continue the appeal against the finding on the lost years issue.
The Court of Appeal reasserted that there is a distinction to be drawn between loss of income from work and loss of income from investments. Had Mr Head, before experiencing any symptoms from mesothelioma, decided to retire while retaining his shareholding in the company, the loss of income claim would indeed have been zero. But that is not what happened; far from it. The trial judge had failed to acknowledge the extent to which Mr Head’s income was due to his personal contribution to his business. He drew a modest salary from the company which was fixed for legitimate tax efficiency reasons and did not accurately reflect his input into the company. The Court of Appeal considered that, at the time of death, all the income which Mr Head and his wife received from the company was the product of his hard work and not a return on a passive investment – and as such, it was recoverable.
The Court of Appeal considered it fair to assume that, absent the mesothelioma, Mr Head would have worked full time until the age of 65. His input into the business would have subsequently diminished on an incremental basis, down to approximately 25% at age 75. Once he no longer worked full time, his dividend income could properly be treated pro rata as income from investments rather than earnings from work. Only when he ceased work altogether, would his income (in the form of dividends from any shares he retained) be entirely income from investments.
The High Court’s assessment of the lost years claim at nil was therefore set aside and the case was transferred back to the High Court for assessment of those damages.
If you would like further information on this decision or you require assistance with an asbestos related or employer liability claim, please contact our Corporate Risk & Insurance Team.
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