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Articles | Thu 21st Jan, 2021
A £4m ‘lost years’ claim unsuccessful at first instance, was successfully appealed in Deborah Head (Executrix of the Estate of Michael Head, Deceased) v. Culver Heating Co. Limited  EWCA Civ 3.
On 18 January 2021 the Court of Appeal set out the proper analysis upon which a loss of years claim can be assessed in light of Adsett v West  2 All ER 985; distinguishing between income from earnings that would not continue after death and income from capital assets that would continue to accrue after death. The judgment contains a helpful and accessible summary of the relevant cases important when defining lost years claims.
Mr Head, aged 61 at the time of his death from mesothelioma caused by asbestos exposure when employed by the defendant, owned and created a successful heating/ventilation business. It was his entrepreneurial skill and vision that had created the business’ success. His wife and adult children were employees of the company and also held shares in it. All took a salary (at a tax efficient level) along with dividends. Mr Head had started to plan for his succession prior to diagnosis and his 2 sons were to take over the business in due course. It was agreed that Mr Head, but for his death, would have continued at full time until 65 and then by 70 years old, Mr Head had planned to reduce his work to 80% and would no longer receive a salary thereon. The eldest son would have then taken over as MD.
At first instance, the key issue was whether there was any loss arising in the lost years. The defendant pleaded that the company was a capital asset that would continue to produce income after death; akin to an investment asset. Moreover that when considered in those terms, the dividend payment continuing after death exceeded Mr Head’s drawn salary and therefore there was no loss. The claimant argued that Mr Head’s income derived significantly from Mr Head’s on-going input and any dividend income to which he may have been entitled, could not be considered as simple investment income, passive to his own labours.
HHJ Clarke (as a High Court Judge) rejected the claimant’s claim on the basis of Adsett:
“the important distinction which McCullough J draws is not between income earned from work or earned from investments, because there are cases such as this one in which those may be fluid, or not easily distinguishable, but between earnings which are lost by the claimant’s death, and those which survive the claimant’s death”
Further HHJ Clarke adopted the approach in Adsett in which a deduction was made for the living expenses of the claimant from his overall income to calculate the loss but then offset this loss against that income which survived the death of Mr Head (i.e. his dividend income). When applied to the instant case, the total annual income minus living expenses was less than the projected dividend income and therefore there could be no claim for lost years.
The Court of Appeal rejected the first instance Court’s analysis and found the following:
‘that most victims of mesothelioma do not earn enough to be able to live off investments. But if we imagine one who, after a few years in the insulation industry, won the National Lottery and then lived off investments before being diagnosed, he would have no claim for loss of earnings in the lost years’.