LOSS OF EARNINGS: HOW DOES THE COURT VALUE “PERKS” AND FRINGE BENEFITS?

I have changed the focus of this blog slightly to include detailed discussions of claims for loss of earnings as these are, almost inevitably, allied to a claim following an accident at work.  In this post I look how the court assesses “fringe benefits”. These benefits can form a substantial part of an employee’s income and it is important that they are not overlooked when the claim for damages is formulated and assessed.

THE COURT IS CONCERNED WITH ACTUAL RATHER THAN THEORETICAL LOSS

The general principle that the claimant must be put in the position he would have been had he not been injured applies.  However  it is clear that the court is concerned with the actual loss to the claimant rather than any theoretical loss

In Dews –v- National Coal Board [1988] A.C. 1, the House of Lords were considering a claim relating to loss of pension payments.   The plaintiff, whilst absent from work, had lost the benefit of payments into his pension fund.   However the absence of those payments made absolutely no difference at all to his eventual pension entitlement.  Nevertheless a claim was made for the payments that would have been made into the pension fund had the claimant been working, on the basis that this represented a loss of income.  The House of Lords rejected the plaintiff’s argument. There was a loss of the payment into the fund but no actual loss to the plaintiff.  Normally the court is not concerned with the question of how a claimant spends his money.  However in the case of benefits provided there was an exception to this general rule, Lord Mackay stated that:

“… the torfeasor is concerned with the disposal of any part of the plaintiff’s remuneration which is applied to obtain benefits which may be affected by the plaintiff’s injury and is affected, would be a proper subjecet of claim against the torfeasor ….. If an employee were entitled to the use of a car for his own purposes on payment out of his salary of a certain contribution and as a result of an injury for which the tortfeasor was responsible he lost that benefit, the tortfeasor would be entitled to take into account the payment which the employer required from the employee for the use of the car as a deduction from the total claim for loss of earnings plus use of the car.”

The question is, therefore : what is the actual loss that the Claimant has suffered? Thereafter the court can consider how to quantify that loss.

Quantifying fringe benefits

 Morgan –v- Ministry of Defence [2002] EWHC 2072 (QB) is a useful case since the question of fringe benefits   was directly in issue. The claimant was a 37 year old army major who suffered permanent damage to the nerves of his right leg as a result of clinical negligence. Upon being medically discharged from the army he found employment which paid a greater salary than he would have earned if he stayed in the army.  However a substantial part of his claim related to the benefits in kind he lost as a result of not being in the army.  A number of awards were made:

 (1) Loss of the ability to let the home.

The claimant left out his home as a result of being posted abroad or living in married quarters.  There was a history of the property being let.  The judge found that there was a “considerable perk of subsidised married accommodation and the ability to let”.  He found that for most of the time the property would have been let.  Taking into account an allowance for “voids” he allowed £3,000 a year.

(2)       Additional motoring costs and accommodation.

The claimant spent 4 ½ days a week away from home. There was substantial  additional mileage which was agreed.

 (3)       Additional accommodation costs and food costs.

Because the claimant was working away from home he incurred accommodation costs.  Further the judge awarded additional food costs of £2,750 – £15 a day.  Particular attention was paid to the fact that the mess in the army would be subsidised.

 (4)       Free dental and health care.

The claimant and his family had the advantage of free and quickly available dental care in the army.  The judge awarded damages for the premiums for dental care and BUPA subscriptions.

 (5)       Clothing

The claimant was given working clothes and a mess kit allowance in the army. He had to buy his own clothes at work.  The judge bore in mind that this this claim could only relate to working clothes and not the whole wardrobe. He allowed £800 a year.

 (6)       Leisure facilities

The claimant had the use of a gym and other leisure facilities in the army . the judge held that “It is clear that he is entitled to the full cost of the replacement of that advantage of his army and service life.”   He allowed the claim for the cost of a gym but held that the claim for a spouse’s membership was not a proper aspect of the claim and disallowed the claim for the costs of the gym membership of the claimant’s wife.

 (7)       Mobile phone.

The judge allowed the claim for the past cost of a mobile phone (the claimant did not have a phone in the army and it was frowned upon). However by the time of the trial mobile phones were so common that it was likely that the claimant would have “capitulated”. Future phone costs were not allowed.

(8)       Private education.

The army would have paid for the costs of serving officers being educated at boarding school.  The claimant had taken advantage of this for a short time for his daughter. The judge had difficulties with this aspect of the claim.

I must, I think, look at the purpose of the allowance. It was intimately connected with army life. It was not so much an educational allowance as a disruption allowance,in this sense: there was no provision made simply for paid education, it was specifically ….. a benefit which could be taken up by a serving officer if they wished their children to go to boarding school. And that was related, as I have said, to the aspect of the disruption that postings might cause.” (Para 67)

 “It does seem to me that I must look at the nature of the benefit. The benefit is one related to the employment. The service in the army having ended, the disruption occasioned by that service has ended. The perk and the cause of the perk go together…” (Para 69)

   The judge also found that it was not certain that private education would have been used in any event and declined to allow any sum in respect of this aspect of the claim.

 Those heads of damages that were allowed  were allowed up to the age of 55 when, the judge found, the claimant would have left the army.

FRINGE BENEFITS IN CASES WHERE THE CLAIMANT HAS NOT YET STARTED WORK

In Dixon –v- Were [2004] EWCA 2273 QB the claimant was a university student , studying economics,whose injuries rendered him unemployable.  Gross J found that the claimant would have obtained employment in the financial services sector. In addition to making an award for loss of earnings awards were made for remuneration package benefits.

 (1) Company car or car allowance.

It was common ground that the claimant’s employment would have brought with it a car or car allowance.  70% of employers in the banking and finance sectors offered such benefits, moreover 96% of directions and 86% of middle/senior managers had company cars.   The evidence was the gross value of car allowances came to £6,792 a year.

The judge held that even if the claimant did not obtain employment which had a car benefit his salary would have been increased to reflect the lack of a benefit.  He rejected the submission that the court should take a “percentage chance” approach. He applied a 0.97 discount to the multiplier to take account of periods of unemployment and stated that the figures needed to be netted down.

 (2) Insurance

 The evidence was that 89% of employers in the banking and finance sectors provided health insurance benefits and 78% of employers provided life insurance.   The judge rejected the argument that a percentage chance discount should be applied:-

I am not persuaded that any such discounting is appropriate both because of the overwhelming probability that such benefits would have been provided and because the loss to the Claimant is the cost of buying replacement cover in the market place.” 

 LONDON ALLOWANCES

In Crofts –v- Murton (2008) S.J.L.B. 31 Judge Collender Q.C. (sitting as a Deputy High Court  Judge) considered damages to be paid to a high ranking police officer who was unable to work.  One issue was the London Allowance and other benefits paid because the claimant worked in London. (Paras 31 – 32)

A part of the Claimant’s pay package as a policeman includes a London Allowance, a rent allowance and Compensatory grant. The Defendant says these items should be excluded from the loss of earnings calculations because they are only paid because the Claimant’s employment required him to live in a certain geographical area and that fact would increase his cost of living.”

 “I consider that there is a fallacy in this argument. The Claimant was paid a total sum of money in respect of his work. It really matters not why his employer decided on the sum paid or in respect of what specific expenses of life it was anticipated by the employer that the money would be used by the Claimant; it is that total sum that he has lost as a result of that employment and it is to that sum he is entitled.”

 Food

In Hopkinson –v- Ministry of Defence [2008] EWHC 699 [QB] the claimant was a seaman whose injuries prevented him returning to sea. He was receiving free food whilst serving on his ship. The judge found that this was an appropriate head of claim and awarded £1,000 a year for past losses. There were uncertainties as to whether it would have been awarded in future employment and the award for future loss of food was discounted accordingly.

Accommodation.

In Shanks –v- Swan Hunter Group PLC [2007] EWHC 1807 (QB) the claimant was an electrician who worked in Australia . As a result of mesothelioma he returned to live in the UK.  As part of his employment package in Australia he had accommodation costs; payment of his utility bills and a company car which he could use for business and personal use on which all expenses were paid.  The court awarded damages on the basis of a loss of £4,544.00 a year for accommodation expenses and £1,574.10 for vehicle expenses.

THE NEED FOR EVIDENCE

Underlying many of these cases relating to benefits is the need for evidence and the quality of the evidence put before the Court.  It is not enough for a claimant to assert a loss.  Material must be put before the Court to:

  •  Establish that a benefit was being paid or would be paid.
  • Enable the court to put a value on that benefit.

In many cases the value will be the cost of the claimant purchasing an alternative benefits.  For instance private health insurance; transport or accommodation.  Evidence of these costs should be before the Court. Further it is important that a critical eye is cast over any quotes, by the defendant in particular, to ensure that represent a like for like benefit.  Defendants should not be shy of seeking alternative quotes.  This is not a difficult task in an age of on-line comparison sites.

SUMMARY

1.    It is dangerous for a claimant to ignore the value of “fringe benefits” when making a claim for loss of earnings. These have a real value and represent a real loss.

2.    There are a whole range of benefits that have to be considered ranging from food to accommodation and transport.

3.    Evidence must be obtained proving both the loss itself and the value of the loss.

4.    Care must be taken to ensure that figures for a loss of benefit represent the real value of the loss. The courts are not sympathetic to “theoretical” losses.

RELATED POSTS

This article originally appeared on Zenith Chamber’s website at http://www.zenithchambers.co.uk/cms/document/Fringe_Benefits___GE.pdf

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