The loss of dependency on income from a family business

September 29, 2020

By Christopher Barnes

The recent case of Eunice Rix (Widow & Executrix of Martin Rix, deceased) v Paramount Shopfitting Co. Ltd. [2020] EWHC 2398 (QB) gave rise to an award of damages that, on the face of it, is surprising. The claimant’s husband had died of mesothelioma attributable to the negligence of the Defendant, his former employer. After leaving his employment with the defendant he had built up a successful business. His wife had owned 40% of the shares in that business and had received a salary and dividends from the business, despite carrying out no work for it. Following his death the business continued and the profits actually increased. The defendant understandably argued that she’d suffered no loss. In rejecting that submission the court relied on the well-known cases of Ward v Newalls Insulation Co. Ltd. [1998] 1 WLR 1722 and Welsh Ambulance Services NHS Trust v Williams [2008] EWCA Civ 81. Ward was authority for the proposition that the court should look behind any corporate or tax structure established in a family context and look at the practical reality of any family dependence. The Welsh Ambulance case confirmed that the loss crystallised at the date of death with the subsequent success of the business being irrelevant. The judge identified three key principles to be taken into account in such cases:

i. There is no prescriptive rule about the way in which the value of a financial dependency should be quantified. The court is performing a function which used to be the function of a jury. It should take a realistic and common-sense approach, not a purely arithmetic one.

ii. It is necessary to separate out income derived from capital from that derived from labour.

iii. The dependency is fixed at the moment of death, with what happens after death being largely irrelevant to the quantification of the financial dependency.

Although, of course, the judgment is one based on the particular facts of that case, it is well worth reading if you’re faced with a complicated financial dependency calculation.