Arnup v MW White Ltd. [2008] EWCA Civ 447

[2008] EWCA Civ 447

Case No B3/2007/0740

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEENS BENCH DIVISION

His Honour Judge Seymour QC

6CB01056

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 07/05/2008

Before

LORD JUSTICE WARD

LORD JUSTICE DYSON

LADY JUSTICE SMITH

Between

Melanie Jane ArnupAppellant

M W White LimitedRespondent

Mr Robert Weir (instructed by Kester Cunningham John) for Appellant

Mr Christopher Purchas QC (instructed by Fox Hartley) for Respondent

Hearing Hearing date : 22 April 2008

Judgment

Introduction

[1]This appeal and cross-appeal are concerned with the meaning and construction of sections 3 and 4 of the Fatal Accidents Act 1976 as amended.

[2]In March 2006, a claim was brought by Mrs Melanie Jane Arnup for damages for the death of her husband Kevin Arnup, who was killed at work on 22 December 2003, in the course of his employment with M. W. White Ltd. Shortly after the death, Mrs Arnup received two substantial payments. On 24 January 2004, she received a cheque for £129,600 and signed a receipt acknowledging that it was a payment ‘in respect of M.W. White’s death benefit scheme’. On 16 February 2004, she received a cheque for £100,000 and signed a receipt acknowledging that the payment had been made ‘in respect of benefits received from M.W. White Employee Benefit Trust’. Later, when she had begun her action for damages and primary liability had been admitted, the defendant employer contended that the two payments should be brought into account when assessing Mrs Arnup’s entitlement to damages. She responded that, pursuant to section 4 of the Fatal Accidents Act 1976, both such payments should be left out of account.

[3]On 17 November 2006, District Judge Pelly directed that the deductibility of these two payments should be decided as preliminary issues. The issues were determined on 27 March 2007 by His Honour Judge Seymour QC, sitting as a deputy High Court Judge. He held that the payment of £129,000 must be deducted. Mrs Arnup appeals against that decision with the permission of Dyson LJ. The judge also held that the payment of £100,000 should not be deducted. M.W. White Ltd cross-appeals against that decision pursuant to the permission of Rix LJ.

The Two Payments

[4]Mr Arnup’s employer M.W. White Ltd operated a death in service benefit scheme which had been set up in 1998. Benefits were secured to members of the scheme by means of an insurance policy, the premiums of which were paid by the employer. All employees were members of the scheme and membership of the scheme was a term of the employees’ contract of employment. The employer was the trustee and administrator of the scheme. In the event of the death in service of a member, a lump sum was to be paid, equal to four times the member’s annual salary. The sum was payable to the employer who had the power to pay it either to the estate of the deceased member or to apply it for the benefit of his dependants or relations or to such persons or bodies as the member may have notified to the employer. The employer had to have regard to but was not bound by any wishes notified by the member. In short, the employer had a discretion as to whom the payment was to be made. When Mr Arnup died, Mr White, the managing director of the employer paid the benefit to Mrs Arnup.

[5]In 2001, the employer had also set up a trust fund. It settled a sum of money upon a company called Bridgwater Corporate Services Ltd as trustees for the benefit of various people including employees and their spouses, children and remoter issue. The trustees were empowered to apply money to the purchase of an insurance policy on the life of any person and were to have the powers of an absolute beneficial owner in relation to any such policy. The trustees entered into a policy of insurance in respect of the lives of 27 named employees of M.W. White. Mr Arnup was one of them. Each life was assured for £100,000. The trustees had a discretion as to the application of the trust funds. When Mr Arnup died, the trust received £100,000 and, at the suggestion of Mr White, the trustees decided to pay that sum to Mrs Arnup.

The relevant statutory provisions

[6]It is convenient at this stage to set out the relevant provisions of the Fatal Accidents Act 1976, as amended. Section 3(1) of the Administration of Justice Act 1982 substituted new sections 1 to 4 of the 1976 Act. Section 1 provides a right of action for a wrongful act causing death. The action is for the benefit of dependants, who are defined. Section 2 provides who is entitled to bring the action. Section 3, entitled ‘Assessment of Damages’ provides:

“(1) In the action such damages …. may be awarded as are proportioned to the injury resulting from the death to the dependants respectively.”

[7]The other provisions of section 3 are not relevant to this appeal but section 4 lies at its heart. It is entitled ‘Assessment of damages: disregard of benefits’ and it provides:

“In assessing damages in respect of a person’s death in an action under this Act, benefits which have accrued or will or may accrue to any person from his estate or otherwise as a result of his death shall be disregarded.”

The Submissions below

[8]Mr Christopher Purchas QC who appeared for M.W. White Ltd below and in this Court submitted that section 4, as properly construed, did not provide that all benefits received by the claimant after the death were to be left out of account in the assessment of damages. The section did not cover payments made by a defendant which were intended to assist the dependants after the death. They were not to be disregarded but were to be deducted from the loss of dependency. Section 4 was intended to cover only benefits received from the deceased’s estate or from some other source independent of the defendant. The purpose of the section was to prevent the tortfeasor taking advantage of charitable donations by third parties and the proceeds of insurance paid for by the deceased. The provision was intended to mirror (in fatal accident claims) the common law position for personal injury claims. This construction would be consistent with the public policy of encouraging employers to set up funds or trusts for the benefit of their employees and of making voluntary payments to the dependants of a deceased employee. If his submission were to be accepted that section 4 does not require that the payments in this case be disregarded, the common law rules of deductibility in personal injury cases must be applied, with the result that both payments should be deducted from Mrs Arnup’s damages. In his oral submissions it appears that Mr Purchas submitted that section 4 did not apply because the two payments did not ‘accrue’ to Mrs Arnup as a result of her husband’s death. They accrued as the result of the benevolence of the employer or as the result of the decision of Mr White (in the case of the £129,600) or the trustees (in the case of the £100,000) to pay the money to Mrs Arnup. The death of Mr Arnup was no more than the occasion of the making of the payments; it was not what caused the payments to accrue.

[9]Mr Robert Weir, who appeared for Mrs Arnup both below and in this Court, submitted that both payments were plainly caught by section 4. They were benefits which had accrued to Mrs Arnup, not from her husband’s estate but ‘otherwise’ as a result of her husband’s death. They should be disregarded in the assessment of damages.

[10]After a lengthy consideration of authority, the judge rejected Mr Purchas’s first submission that section 4 must be construed so as to exclude from ‘disregard’ any payment made by a defendant tortfeasor. He accepted Mr Purchas’s submission that these two payments had not accrued to the claimant as a result of the death. He held that in each case the monies had been paid as the result of an independent decision by Mr White (in respect of the £129,600) and the trustees (in respect of the £100,000). These independent decisions had broken the chain of causation between the death and the accrual of the money to Mrs Arnup. The death was merely the occasion for the making of the payments, not what caused the payments to be made to her. It followed that section 4 did not require either payment to be disregarded in the assessment of damages.

[11]The judge then sought to apply the common law exceptions to deductibility in personal injury cases. He considered ‘the insurance exception’ and ‘the benevolence exception’. After further consideration of authority, he held that neither payment fell within the insurance exception because Mr Arnup had not contributed to the premiums for the insurance policies. He then considered the benevolence exception and held that the £100,000 payment from the trustees fell within that exception and must therefore be disregarded. The £129,600, did not fall within that exception and must therefore be brought into account and deducted from Mrs Arnup’s loss of dependency.

The Appeal and Cross-Appeal

[12]The main issue is the same in both the appeal and cross-appeal. Were these payments caught by section 4, so that they fell to be disregarded in the assessment of damages? Mr Weir, whose written and oral submissions were a model of clarity and economy, argued that they plainly were. He submitted that the judge’s holding that the payments did not accrue to Mrs Arnup as a result of the death was highly artificial. Issues of causation in fatal accident claims should be approached in a common sense way. Such issues had originally been questions for the jury, although they no longer were. A decision on causation should not be governed by narrow, technical matters such as the judge had relied on here.

[13]He submitted that in the present case, the chain of causation was clear, strong and direct. Mr Arnup’s life was insured under two policies set up for the benefit of the families of employees. The provision of the death in service scheme was a term of his contract of employment. There was a plain expectation that, in the event of his death, his family would receive the death in service benefit. That is what happened. Had it not been for the death, the insurance payment would not have been made. The only real choice which Mr White had when deciding to whom the payment should be made was between Mrs Arnup and the deceased’s estate, which would have amounted to the same thing. It was well nigh unthinkable that he should decide to give the money to the couple’s only child, Jason Arnup, aged about 15, who at the time was an employee of M. W. White Ltd. As for the £100,000, the trust had been set up for the benefit of employees. The trustees insured the life of some employees, including Mr Arnup. There was a clear expectation that the family of an insured employee who died would benefit. That is what happened here. Had Mr Arnup not died there would have been no money to pay out. Mr Arnup’s death triggered the payment and, in line with Mr White’s intention in setting up the trust, the trustees chose to pay the money to Mrs Arnup.

[14]Mr Weir’s second submission arose only if (contrary to his first submission) the judge had been right to hold that the payments had not accrued as the result of the death. He submitted that the judge had failed to appreciate the connection between section 3(1) and section 4 of the Act. Section 3, which I have set out above, utilises the same words as had appeared in section 1 of the Fatal Accidents Act 1846. There is no dispute that these slightly obscure words mean that a claimant is entitled to recover only his or her net loss. In other words, under section 3, a claimant must set off against the loss of dependency any benefits he or she receives as the result of the death. Section 4 provides for the disregard of (some or all, depending on whether Mr Purchas or Mr Weir is right) the benefits which have been brought into account under section 3. However, a claimant is not required to bring into account under section 3 any benefits received otherwise than as a result of the death. Mr Weir’s point was that, if these two payments were not made to Mrs Arnup as the result of the death, they were completely irrelevant to the assessment of damages under the Act. So, if the judge was right about causation, the payments would still not have to be deducted from her loss of dependency. As I have said, that was not Mr Weir’s primary case, which was that both payments did accrue to Mrs Arnup as a result of the death. Therefore they had to be brought into account under section 3 but had to be disregarded under section 4. Mr Weir referred to his second point as his ‘heads I win, tails you lose’ point.

[15]Mr Purchas submitted first that the judge had been right on causation; he had been right to hold that the two payments had not accrued to the claimant as a result of the death. She had received them as a result of the independent decisions of the employer and the trustees respectively. He relied for support on Hay v Hughes

[1975] QB 790

, to which I will later return.

[16]His next submission related to the effect of section 3 of the Act. He agreed with Mr Weir that section 3 requires that a claimant should recover only the net losses resulting from the death. His argument was that that principle required that any payment made by a defendant subsequent to the death should be brought into account in reduction of the claim, unless there was an express statutory provision to the contrary. In this case, there was not and the result should be that the sums were deducted. Such a result was in accordance with the same public policy considerations as operated in respect of the reason why an ex gratia payment made by a defendant should be taken into account and deducted from damages in a personal injury claim: see Pirelli General PLC v Gaca

[2004] 1 WLR 2683

and

[2004] EWCA Civ 373

at paragraphs 30 – 31.

[17]Third, Mr Purchas submitted that section 4 did not require disregard of ex gratia payments. The section related only to payments that the claimant had received as of right and excluded any payments which had been made voluntarily. These payments fell into that category. He suggested two reasons why this construction was correct. First, it was clear that benefits accruing to the claimant from the deceased’s estate had to be disregarded. But the expression ‘or otherwise’ did not mean ‘anything else’; it was limited to benefits such as insurance, pension and state benefits to which the claimant became entitled in some way as a result of the death. Mr Purchas shrank from suggesting that the entitlement must be enforceable by law and wished to confine himself to saying that there must be some sort of entitlement. This construction, he submitted, was demanded by the words ‘accrued to’ in section 4. The words ‘accrued to’ did not mean merely ‘paid to’ or ‘received by’. They carried an implication of entitlement. For example, interest ‘accrued to’ a depositor of money as of right. The words ‘accrued to’ had not been used in any previous provision relating to the disregard of benefits received as the result of the death. Parliament must have had some reason for introducing those words and they must be given some meaning. The true meaning was ‘received as the result of an entitlement’. When asked whether that would mean that an ex gratia payment from someone other than the tortfeasor would have to be deducted, his reply was that the payment would not be saved from deduction by section 4 but would be saved by the benevolence exception at common law.

[18]Mr Purchas was anxious to stress the powerful public policy reasons why an ex gratia payment made by the tortfeasor should be deducted from the claimant’s loss of dependency. Employers should be encouraged to set up schemes and trusts for the benefit of their employees and to make benevolent payments following a death. If such payments were not to be deducted from the loss of dependency, employers would be discouraged. If the appellant was right any such payment would have to be disregarded; indeed, even an interim payment would have to be disregarded. Mr Weir’s response to that was to say that an interim payment could not possibly be disregarded; whether made voluntarily or pursuant to an order of the court, it was plainly a part payment in respect of damages and not a ‘benefit’. As to a payment made before the action was commenced, if an employer wanted to make a payment but wished it to be taken into account against any damages which might be awarded against him in future, he could quite easily stipulate that the payment was given on condition that it would be deducted in the event that damages were awarded. If that were done, the payment would not be a ‘benefit’ and would not be caught by section 4.

[19]Mr Purchas also submitted that a defendant should not be required to compensate for the same loss twice over. Where a defendant made an ex gratia payment, he should mitigate his liability pro tanto: per Lord Bridge in Hunt v Severs

[1994] 2 AC 350

at 358C. That was a personal injury case. It was an essential feature of Mr Purchas’s submissions that all the same policy considerations should apply in fatal accident claims brought under the Act as applied at common law in personal injury claims.

[20]In reply to that, Mr Weir submitted that it was important to understand the process of assessment of damages under the Fatal Accidents Act, its relationship with the common law and the effect of the 1982 amendment. Under what is now section 3, the Act envisages that the claimant will recover his or her net loss resulting from the death. Until 1982, the process of assessing damages had two stages: see Davies v Powell Duffryn Collieries Ltd

[1942] AC 601

at 606 and 609; also Malyon v Plummer

[1964] 1 QB 330

at 349. The first stage was the quantification of the loss of dependency. The second stage was the deduction of any benefit which the dependent had received as a result of the death. The second stage was subject to various exceptions by which some benefits fell to be disregarded. The first statutory exception was introduced by the Fatal Accidents (Damages) Act 1908, which provided that in assessing damages under the Act of 1846 there should not be taken into account any sum paid or payable on the death of the deceased under any contract of assurance or insurance. Mr Weir drew attention to the decision in Green v Russell

[1959] 2 QB 226

where this court held that a payment on the deceased’s death under a group insurance policy taken out and paid for by the employer was not to be deducted. The employer had received the money and had paid it to the deceased’s dependant. The court held that the 1908 amendment applied to any insurance policy and not only to policies paid for by the deceased. Further statutory exceptions were introduced in 1929, 1948 and 1959. In the Fatal Accidents Act 1959, all the existing and new exceptions were drawn together in section 2 which provided that in assessing damages under the Act of 1846, there should not be taken into account any insurance money, benefit, pension or gratuity which has been or will or may be paid as a result of the death. ‘Benefit’, ‘insurance money’ and ‘pension’ were all defined; ‘gratuity’ was not. Section 2 of the 1959 Act was reproduced in section 4 of the Fatal Accidents Act 1976, as originally enacted. One benefit which still had to be deducted from the loss of dependency was any sum which the dependent received from the deceased’s estate. However, in 1982, the new section 4 provided that receipts from the estate were also to be disregarded. The 1982 amendment did not expressly provide for the continuance of the disregard exceptions in the 1976 Act. Mr Weir’s submission was that the legislative trend over the years had been towards greater disregard of benefits and this had been continued and had culminated in the new section 4 which provided that all benefits resulting from the death were to be disregarded. In effect, section 4 swept away the second stage of the assessment. The Act now requires only the quantification of the loss of dependency. Mr Purchas’s contention that there are some exceptions to the disregard rule is unsustainable. Once the loss of dependency has been calculated, there is nothing to be deducted. That is what Parliament has decided and the fact that the claimant will in many cases receive more than she has lost is nothing to the point: see Buxton LJ in McIntyre v Harland Wolff plc plc

[2006] 1 WLR 2577

at 2581A. Nor, submitted Mr Weir, do the policy considerations which pertain at common law have any bearing on a claim under the 1976 Act. Parliament has decided what the law should be, presumably for policy considerations which it regarded as appropriate.

Discussion

[21]It seems to me that Mr Weir’s two main submissions taken together are unassailable and must lead this Court to allow the appeal and dismiss the cross-appeal, upholding the judge’s result but not his reasoning. I will deal with the second one first. If the judge was right about causation and the two payments did not accrue to Mrs Arnup as a result of the death, he must have been wrong to hold that (subject to any common law exceptions) the payments were deductible from the loss of dependency. I am wholly persuaded by Mr Weir’s submission, as I have set it out at paragraph 14 above. Mr Purchas really had no answer to it. I note that Mr Harvey McGregor QC expressed the same view as Mr Weir in his discussion of the judge’s decision in this case at paragraph 36-115E of the Fourth Supplement to the 17th Edition of his book on Damages. I quote:

“…once the judge had arrived at the stage of deciding that the payments did not result from the death – so that section 4 did not apply, he should then have adopted the common law position that benefits which do not result from the death are equally to be disregarded because of that very lack of relationship with the death. ”

[22]I conclude accordingly that, if the judge was right about causation, he could not hold that either of the payments fell to be deducted from the loss of dependency. If they were not received as a result of the death, they were completely irrelevant to the whole question of assessment of damage. For that reason alone, the appeal must succeed and the cross-appeal must fail.

[23]However, Mr Weir’s first submission is that the judge was wrong about causation and Mr Purchas sought to uphold the judge’s holding on that issue. Accordingly I do not think I should decide this case only on the limited basis I have already discussed. If the judge was wrong about causation and these payments did accrue to Mrs Arnup as a result of the death, would it follow that they should be left out of account in the assessment of damages pursuant to section 4 of the Act as amended?

[24]Two issues arise for decision. They are whether the word ‘accrued’ has the limited meaning which Mr Purchas contends for. The second is whether, in the light of the answer to the first, the judge was correct or even entitled to hold, as he did, that the two payments did not accrue to Mr Arnup as a result of her husband’s death.

[25]Does the word ‘accrued’ have the limited meaning attributed to it by Mr Purchas? Is the effect of section 4 to require the disregard only of benefits which came to the widow as a matter of entitlement? Or does section 4 require that all benefits which came to her as a result of the death be disregarded?

[26]I am quite satisfied that all benefits which came to the widow as a result of the death are to be disregarded. It is true that, in the earlier ‘disregard’ provisions, the words ‘accrued to’ were not used. Before 1982, the word ‘paid’ was used in some statutes and in others it was said that ‘no regard should be had to benefits resulting from the death’. However, Mr Weir suggested that, until 1982, all the benefits that had to be disregarded were financial benefits; so the word ‘paid’ was appropriate. After 1982, non-pecuniary benefits were also to be disregarded. The words ‘accrued to’ were apt to cover both pecuniary and non-pecuniary benefits. That, he suggested, was the explanation for the change of wording. He may be right. In any event, I do not see how the introduction of the word ‘accrued’ can be made to bear the weight which Mr Purchas wishes to accord it. Bearing in mind the development of the law on disregard of benefits, it seems to me incredible that Parliament would have intended to set in reverse the general trend towards the disregard of benefits merely by the introduction of the word ‘accrued’. That there has been such a general trend, I am in no doubt. Beginning in 1908, there had been a gradually increasing list of benefits and payments which were to be disregarded. By 1976, these included all insurance payments, pensions, statutory benefits and all ‘gratuities’. Mr Purchas sought to persuade us that ‘gratuities’ were limited to such things as lump sum payments under pension schemes but that argument is unsustainable, both as a matter of construction of section 2 of the 1959 Act and section 4 of the 1976 Act (as originally enacted) and also because of the ordinary natural meaning of the word gratuity. ‘Gratuity’ covered all gifts from any source. In other words, it covered payments to which the dependent had not been entitled. Thus, by 1959, there was a very wide range of payments which fell to be disregarded in the assessment of damages in a fatal accident case. (I mention in passing that that range plainly included payments such as were made in this case, whether the payments were to be regarded as ‘any insurance money paid as a result of the death’ or as a gratuity.) But, after 1959, there were still some benefits not covered by the disregard provisions and which still had to be deducted from the loss of dependency. These included any benefit received from the estate and also benefits in kind, such as gratuitous services. Then Parliament passed the 1982 amendment; it did not restate the old detailed list of pecuniary benefits. That list was replaced and clearly subsumed within the very general words ‘or otherwise as a result of the death’. That expression was also wide enough to cover benefits in kind which accrued as a result of the death and any other kind of benefit which might not yet have been identified. If Mr Purchas were right, some elements of the old list of disregards would have survived the 1982 amendment and others would not. Yet he could point to no support for such a construction, other than the use of the words ‘accrued to’. It seems to me quite clear that the intention of Parliament in passing the 1982 amendment was to continue and complete the trend towards disregarding receipts so as ensure that all benefits coming to the dependant as a result of the death were to be left out of account. As Mr Weir submitted, the effect has been to abolish the second stage of the old assessment process. Today, all that must be done is to quantify the loss of dependency. I also accept Mr Weir’s submission that, if a person who may in future be sued and be held to be liable for the death wishes to make an ex gratia payment but wishes to have it taken into account when damages are assessed, he must make the payment subject to that stipulation. Then it will not be a benefit, caught by section 4, it will be a conditional payment on account.

[27]In the light of what I have said, it can now be seen that the issue of causation is no longer a matter of any great importance in cases of this kind. Before 1982, it was important to decide whether a benefit had accrued to or been paid to the dependant as a result of the death. If it was not so paid, it would be left out of account as irrelevant. But if it had been paid as a result of the death, it would have to be deducted unless it was saved by one of the statutory disregard provisions. Now that the statutory disregard provisions cover all benefits which accrue as the result of the death, it no longer matters whether a benefit accrues as the result of the death; it cannot be deducted in any event. Mr Purchas argued that this could not be the effect of the 1982 amendment. If it were, section 4 would be otiose and Parliament would never have allowed that to happen. I do not accept that submission. I agree that it would have been possible to achieve what I have held to be the combined effect of sections 3 and 4 in much simpler language. To that extent, it might be said that the two sections combined are to some degree otiose. It might have been better if there had simply been a statement that the damages in a fatal accident case were to be the loss of dependency. But, historically, the legislation has always provided for assessment in two stages and Parliament has seen fit to retain that format, even though the second stage, section 4, requires the disregard of all benefits which would otherwise have to be brought into account under section 3.

[28]Accordingly, it is no longer important to decide whether a benefit has accrued as a result of the death. I do not propose to lengthen this judgment by a discussion of the correct approach to causation in respect of benefits received following death. I propose only to say that there seems to me to have been much force in Mr Weir’s submission that the judge’s approach was artificial. He seems to have thought that, because the death was not the only cause of the payments being made to Mrs Arnup, it could not have been a cause. It was made plain in Hay v Hughes that in a fatal accident case, causation should be decided by the application of common sense. In his lecture to the Chancery Bar Association in 1999, entitled ‘Common Sense and Causing Loss’, Lord Hoffmann expressed the view that judicial citations of common sense in relation to causation ‘often conceal or perhaps reveal, a complete absence of any form of reasoning …. in the best tradition of English anti-intellectualism’. If causation were important in this case, I would rise to the bait and attempt a more reasoned argument. However, as it is not, I will content myself to say that, looked at in a common sense way, these payments plainly accrued to Mrs Arnup as a result of her husband’s death. The availability of the sums and the payment of them to Mrs Arnup were very closely related to the death of her husband. The sums would never have become available were it not for the death. The whole purpose of setting up the policies under both the death in service scheme and the trust was to make provision for the families of the deceased employee. That is what happened. If it mattered for the purposes of this appeal, which it does not, I would have held that the judge’s decision was wrong, in that he had approached the question in a narrow, technical way and not as a matter of common sense.

[29]For the reasons I have given, I would allow the appeal and dismiss the cross-appeal. Lord Justice Dyson : I agree. Lord Justice Ward: I also agree.