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Death is different

Published 25/07/2008

Compensation claims that follow a death do not necessarily apply the same principles as those for personal injury. Duncan Rutter looks at two recent cases that provide some clarity on quantification

Two recent Court of Appeal decisions relating to damages paid in fatal accident claims illustrate that ordinary principles of quantification in personal injury claims do not always apply to claims for compensation following a death.

The case of A Train & Sons v Fletcher dealt with interest on damages for financial dependency and touched on the calculation of multipliers in fatal claims; while the second case of Arnup v M W White revolved around the deduction of benefits accruing as a result of death.

The trial judge in A Train & Sons awarded interest at the full special damage rate on the whole of the award for financial dependency from the date of death. He reasoned that, since the multiplier was fixed at death, the damages accrued in full at that time and the claimant was entitled to interest at the full rate on the whole amount – even though most of the award for financial dependency covered a period after trial.

Multiplier merits

The Court of Appeal allowed the defendant’s appeal, deciding that the judge was bound by the House of Lords’ decision in Cookson v Knowles. This said interest should be awarded at half the special damage rate on the part of the claim for financial dependency that covers the period from death to trial.

The court discussed the merits of fixing the multiplier at death rather than at trial, as in PI claims. It acknowledged that fixing the multiplier at death often leads to a lower award of damages – a point previously made by the Law Commission and by the Ogden working party.

The usual criticism of the Cookson approach is that in calculating the multiplier at death, a discount is made for accelerated receipt of damages awarded for past losses – namely the loss of dependency from death to trial. To avoid this difficulty, the Ogden working party has suggested the multiplier should be fixed at trial, with a discount being made to the award of dependency between death and trial to reflect the risk of the deceased dying during this period (although in most cases this deduction will be negligible). However, it should be noted that the Ogden working party considers even this method to lead to inaccurate results and comments that the help of an actuary is necessary when accuracy is important.

Both Sir Mark Potter and Lord Justice Hooper expressed the hope that the House of Lords would reconsider the law in this area but nevertheless held that Cookson (followed by the Lords in Graham v Dodds) is still good law and there is no justification at present for the approach recommended by the Ogden working party in the explanatory notes to the Ogden tables.

The trial Judge in Arnup deducted a payment of £129,600 from the defendant’s death-in-service benefit scheme when assessing damages under the Fatal Accidents Act. The scheme was secured by means of an insurance policy and the premiums were paid by the defendant employer. The payment had been made to the deceased’s widow by the trustees of the scheme in exercise of a discretion to make such payments. The judge concluded that the payment had been made not as a result of death but as a result of the exercise of that discretion, thus avoiding the usual effect of s4 of the Fatal Accident Act 1976 (as amended), which provides benefits accruing as a result of death shall be disregarded.

The Court of Appeal held that the judge’s interpretation of s4 was wrong. The trial judge had been persuaded that it was necessary to analyse the causal link between the death and the payment. This led him to make what was described by Lord Justice Smith as an artificial distinction – apparently thinking that because the death was not the only cause of the payment, it could not be a cause of it.

In reaching this conclusion, the trial judge overlooked the more basic point that if the payment was not connected with the death, it could not be taken into account in any event.

In a short but authoritative judgment, which includes an analysis of the statutory history of the relevant provisions, Lord Justice Smith explained that causation is no longer important in determining whether benefits should be taken into account. By 1982 the position was that all benefits – including gratuitous payments – as a result of death were to be disregarded. There are no exceptions. If a benefit accrues for some other reason, unconnected with the death, it is irrelevant in any event; and if it is paid as a result of the death it must be disregarded under s4.

Extent of dependency

Thus, all that is now necessary in fatal accident claims is to calculate the extent of the dependency. The old two-stage process of first calculating the dependency and then considering which benefits could be deducted is no longer necessary.

Importantly, however, Lord Justice Smith pointed out that where a defendant wishes to make an ex-gratia payment but wants to have that payment taken into account in the calculation of damages, it is necessary for the payment to be made expressly on account of damages so that it is taken into account as an interim payment. It is, therefore, possible for defendants in the position of M W White to ensure that discretionary payments, made under the terms of a death-in-service benefits scheme, are taken into account by making the payment subject to the stipulation that it is to be taken into account when damages are assessed.

These decisions demonstrate how easy it is to fall into error by wrongly applying general principles that apply to injury claims to fatal accident claims. In relation to the calculation of damages, death is different.

- Duncan Rutter is a partner in the injury risk group at national commercial law firm Beachcroft.

This article has been reprinted with permission of the Claims Standards Council

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