When assessing what damages should be awarded for income representing “lost years”, the Court of Appeal has held in Head v The Culver Heating Co Ltd that courts must assess the value of the earnings or earning capacity which the claimant personally has lost and not just dividend or investment earnings that continue to be paid out.
Basic facts
Mr Head, the managing director of his own heating and ventilation firm, Essex Mechanical Services Limited (EMSL), was negligently exposed to asbestos when he was an apprentice heating engineer from 1974 to 1979 at Culver Heating Co Ltd. In March 2018 he was diagnosed with mesothelioma and died of the disease in late 2019.
Before his death, Mr Head lodged a claim for damages against Culver. Although the parties did not disagree on many of the items, there were very far apart on the principal issue - what damages should be awarded for income representing "lost years" - a reference to the years he would have worked had he not been terminally ill. It was accepted that he had intended to work until he was 75, albeit on a part-time basis from the age of 65.
Mr Head estimated this loss to be just over £4,421,683. Culver, on the other hand, estimated it to be nil on the basis that there was no reason to suppose that EMSL would not remain profitable after his death which would mean his estate would continue to receive the dividend income from the shares that he held with his wife after his death. In addition, as his personal living expenses exceeded his salary income, there could not be any loss on that basis.
High Court decision
The High Court agreed with Culver that the loss was nil. Based on the decision in Adsett v West, the judge held that the real distinction was “not between earned income and income from capital but from income which is lost on death and income which survives death". As the income generated by the business would continue after his death, it could not be said that there had been a loss.
The judge initially refused permission to appeal the decision, but the Court of Appeal granted permission to avoid a “real injustice” to Mr Head’s estate.
Decision of Court of Appeal
Agreeing with the judge in Adsett, the Court of Appeal held that the distinction to be drawn was between loss of earnings from work and loss of income from investments. It follows that, if someone suffering from mesothelioma retired from work before they were diagnosed, they would not be able to claim for loss of future earnings.
However, Mr Head had clearly not done that. Instead, he was and would have remained for some time the “driving force” within the company, as the High Court judge herself had accepted. Indeed, at the time of his death, the vast majority of the income which he and his wife received from the company was “the product of his hard work and flair, not a return on a passive investment”.
When investigating a lost years’ claim, courts must therefore assess the value of the earnings or earning capacity which the claimant has personally lost. As Mr Head had clearly lost out on future earnings and would have to be replaced, it was irrelevant that the company was likely to continue to be profitable.
The Court therefore allowed the appeal and remitted the case to the High Court for an assessment of the damages owing to his estate.