A fatal misconception

A COMMON MISTAKE among personal injury lawyers is to treat fatal accident claims as a personal injury claim though they are different. A recent Court of Appeal decision has illustrated possible misconceptions as to when adult children might be classed as dependants and whether dependants can affect the value of their claim through their actions post-death.

Road traffic accident

The case of Williams v Welsh Ambulance NHS Trust [2008] EWCA Civ 71 concerned Gordon Williams, who was killed in a road traffic accident on 16 June 2001, in a tragic irony, by an ambulance. Mr Williams was a remarkable man. He was nearly 50. He had worked himself up from virtually nothing to be the proprietor of a successful builder's merchant yard in Hay on Wye. He had bought and redeveloped a number of properties, some for homes for his children.

He also had an interest in acquiring and refurbishing old steam engines. His wife had helped out in the business a bit but her role was very minor. The two eldest children aged 24 and 22 at the time of the accident, worked in the business. However they had junior roles. Along with their mother they became equal partners in the business with Mr Williams but their contribution was far below the income they actually earned as partners. Mr Williams was the driving force. Having his children and wife as equal partners was simply more tax efficient.

When Mr Williams died the average business profits were in the region of £400K per annum. The children were determined to maintain their father's legacy. They took on the responsibilities which they had previously been sheltered from. The third, youngest child, joined as a partner. They worked tirelessly and were able to maintain the business and its level of profits.

The widow was an obvious dependant. But what of the children? As Lady Justice Smith said in the Court of Appeal 'As three able-bodied adult children, they were unusual dependants.'

Most practitioners assume that dependency ends when a child becomes 18 or leaves higher education. Adult children live their own lives; have their own income and possibly their own children. However, the test as to whether someone is dependant is whether there is reasonable expectation of pecuniary benefit from the deceased. In Hetherington v N.E. Ry [1882] 9 QBD 160, a young bachelor had helped his elderly disabled father financially during a period of unemployment some years previously. It was held that there was pecuniary loss suffered by the father upon the son's death. This case laid down the test that damages:

'Should be calculated in reference to a reasonable expectation of benefit, as of right or otherwise, from the continuance of life'.

Thus a dependency claim is a prospective claim. The fact that the deceased was providing support prior to death, can be useful evidence to establish that he would have continued to provide assistance had he not died. However, the test is really that there should be a continuing or future expectation of a benefit.

A recent example is in Kandalla v BEA Corp [1980] 1 ALL ER 341, the dependants were the parents of two daughters, both doctors who had been killed in an air crash. It was the parents' intention to leave Iraq and to come to England where they would have been supported by their two daughters. The court awarded a quarter of the daughters' combined income to represent a dependency by the parents on their deceased daughters.

Dependent on father

In Williams, not only the widow but the adult children were dependent upon Mr Williams at the time of his death. Their own respective contributions to the family business were small. They did not correlate to the rewards they obtained as partners in the business. Thus they were dependent on their father and would have remained dependent. The deceased also provided property for his children. Consider whether this can apply in more straightforward situations.

For example, what of the DIY enthusiast who regularly refurbishes the houses of his children or the doting grandmother who provides large amounts of child care? Are not those children obtaining a pecuniary advantage and likely to continue obtaining such an advantage, as a result of the respective parents' efforts? If so, are they not dependants? Solicitors must examine the family situation carefully. The deceased may have more dependants than one might otherwise have thought.

The second key point in Williams was how the actions of the dependants after the death impact on the claim. It was the defendant's case that there was no dependency. The family had been at least as well off after the death as before.

Essentially the issue here is, what types of factual developments can the court take into account between death and trial? Clearly some post-death facts are relevant and must have an impact. For example, wage levels must be dealt with on the basis of the most up-to-date information available. Also, if a dependant died before the trial, that would have to be taken into account.

However the Court of Appeal endorsed the judgment of HHJ Hickinbottom at first instance who said that 'generally dependants cannot by their actions affect, either to their advantage or to their disadvantage, the existence of value of a dependency. . . had Mrs Williams and the other dependants . . . decided to sell the builders merchant business and live off the income of the capital produced, that would not have affected any dependancy claim they might have had. Neither in my judgment can the identification and valuation of the dependancy depend upon the success or otherwise of dependants' efforts to run a business they had inherited. On policy grounds alone, this would be repugnant, as it would encourage failure and penalise success'.

In other words, by working hard to keep the business going the family would be penalised if the defendants were correct. On the defendants' view of the law it would have been in their claims best interests simply to have packed in the business immediately after the death of Mr Williams. Then there would have been a straightforward and obvious loss of income. That however cannot be a satisfactory state of affairs.

A previous case that had considered this type of issue was Cape Distribution v O'Loughlin [2001] EWCA civ 178. There the deceased had owned and managed a number of properties. After his death the widow inherited the properties and for a while she attempted to manage them but did not have the aptitude for this. Thus she sold some and lived off the income. She claimed a loss of dependency. It was identified by the Court of Appeal in that case that what the dependant had lost was the flair and business acumen of the deceased. This was capable of being measured in money terms as the cost of replacing the deceased's skills as a manager. For example, the cost of employing a manager or adviser to run the families property portfolio. As Latham LJ stated: '[This is] the most secure basis from which to attempt to place a pecuniary value on the loss to the dependants arising form Mr O'Loughlin's death. Whether (the widow) chooses to have such an advisor or not is another matter. But the fact will always remain that she and the dependants will have lost the services of Mr O'Loughlin as the manager of the family assets and that loss is capable of being valued in money terms.'

Contribution was lost

This principle of course could be applied in the case of Williams. The Court of Appeal endorsed the judgment at first instance that what the Williams family had lost was not income derived from the capital assets of the business but the contribution of Mr Williams, as the manager of the business. They had lost his flair, skill, expertise and energy in the various wealth creating projects on which he engaged in and which if he had lived, he would have continued to work on. Applying the principle of O'Loughlin and indeed the general principle that dependants cannot affect the value of their dependancy, it was irrelevant whether the family hired someone to replace Mr Williams, sold the business or indeed, as they did, replaced his skills with their own.

As HHJ Hickinbottom said: 'None of these can affect or diminish the true loss to the dependants as dependants.'

Therefore the fact that the dependants in Williams were as well off after the death as before, because they took over the responsibility for managing the business and did so successfully had no bearing on the case.

Whatever the dependants did and with whatever result, good or bad, they could not affect the value of their dependency as it stood at the date of death. This is not because the financial benefit that had been brought to the Williams family was a 'benefit accruing as a result of death' which had to be ignored under s 4 of the Act.

It was because the financial benefit was irrelevant to the assessment of the dependency under s 3 of the Act.

As Lady Justice Smith in the Court of Appeal said: 'A dependant cannot by his or her own conduct after the death affect the value of the dependancy at the time of death.'

She went on to emphasise that: 'The dependancy is fixed at the moment of death; it is what the dependants would probably have received as benefits from the deceased had the deceased not died. What decisions people make afterwards is irrelevant.'

In this case the approach of course worked in favour of the family. By their efforts they had maintained good profits for the business and this did not count against them. What would have happened however if, after death, a dependant chooses to do something which markedly reduces their income? An example may be the working woman who gives up her job after her husband's death because she is so shaken by the incident. In working out the household income for a dependancy claim should one might still have to include the wife's pre-death income, even though she has ceased work? Her actions in giving up work increase the value of the dependancy calculation.

Affect value of dependancy

However, Williams suggests that she cannot affect the value of her dependancy to her advantage. The wife's actions in this example would have to be presented as a way of replacing some of the deceased's services over and above what he generated in income. Obvious examples might be child care and DIY. It is an issue that is going to have to be treated carefully and sensitively by those advising the widow in this type of example.

It was accepted by everybody, including the defendants, that the late Mr Williams was an exceptional individual. Based on the cost of replacing Mr Williams managing the family business, in developing its properties and steam engine collection, the claim was ultimately assessed in the sum of just over £1.9m. It is a large sum but Mr Williams was a true 'one off' and as everybody is all too aware, money can never truly replace a loved one.