17 September, 2021
When you lose a loved one it has significant implications emotionally, practically and financially. If a third party has negligently caused the death, the law makes for provision for certain categories of claimant to seek compensation.
In this article we will explore financial dependency in a family business.
The assessment of damages under s3 of the Fatal Accidents Act 1976 is highly fact-dependent and based on the extent of a dependant's loss, calculated had the deceased survived.
Welsh Ambulance Services Trust v Williams
Mr Williams was walking along the pathway when the ambulance, when rushing to an emergency call, lost control, and unfortunately killed him. Liability was admitted. Mr Williams owned a builder's merchant business with his family. The court found that if Mr Williams had lived, he would have continued to work in his successful business, creating further wealth for another thirty years. On forensic examination of the business, ultimately it was Mr Williams who was creating larger profits and turnover due to his management of the business. The financial benefit that each family member brought to the business after Mr Williams death was irrelevant when considering the loss of dependency. Although the business became more successful and profitable after the death of Mr Williams, the court awarded almost £2m damages.
Wood v Bentall Simplex Ltd
Similar to the above case, the court had to establish how much loss had arisen due to the fact that the deceased was no longer alive and able to work, and how much of his income had been derived from capital which the dependents had inherited. As the dependents had inherited the capital, the court had to consider and separate out the proceeds of capital (which did not give rise to any loss of dependency) and income that had been earned, which would give rise to a loss of dependency because it would come to an end at the death. The value of the deceased's labour had been accepted as the proper measure of the dependency.
The legal principles referred to in the cases above do not apply to a situation where people who are business partners, and one of those business partners dies.
Burgess v Florence Hospital for Gentlewomen 
The relationship between the claimant and the deceased was primarily a business relationship, so the claimant cannot claim a dependency solely because they also happen to fall within the statutory class of dependants.
The Fatal Accidents Act does not give a right of recovery for the loss of business profits suffered by a surviving business partner. The simple fact that the partners happen to be husband and wife, or father and son, does not enable the survivor to claim a dependency.
Paramount Shopfitting Co Ltd v Eunice Rix 
Martin Rix was employed by Paramount in 1970s and whilst working for Paramount he was exposed to asbestos which later resulted in his sad demise through mesothelioma at the age of 60. Liability was admitted.
In 1977 Mr Rix left Paramount to set up his own construction business which was very successful, and he was the main source of financial income for the family. The company remained highly profitable after Mr Rix death, with increased turnover and profits. After the death, the widow's shareholding doubled when she inherited the deceased's shares. Overall, she found herself in a substantially better financial position after her husband's death.
The Court of Appeal reiterated that the question was the extent of the dependants' losses based on a reasonable expectation of pecuniary benefit had Mr Rix survived. Each element of the business profits was affected by Mr Rix's management, and the company would not have continued to generate money regardless of who oversaw it, so the dependency was truly upon Mr Rix rather than the company.
As you can see, quantifying and assessing the financial loss in a family business scenario is very complex and reliant heavily upon each individual fact and the circumstances of each case. We are instructed regularly to explore dependency in unique situations, recognising that family dynamics and business are all different. With skill, experience, empathy and expertise we work closely with forensic accountants to understand the role of the deceased within the business and calculate the financial loss.
For more information contact Leonie Millard in our Personal Injury department via email or phone on 01254 770517. Alternatively send any question through to Forbes Solicitors via our online Contact Form.