Under the Fatal Accidents Act 1976 where a dependent claims for loss of business, including shares, capital, and income the law can be highly complex and expert legal advice will be required. In general the dependents of a deceased person can claim for financial losses resulting from the death. This can include loss of income, loss of benefits, and loss of services. Claims for loss of business, including shares, capital, and income, can be complex and often require detailed financial evidence and several cases are reported below:
Notable Cases
- Davies v Taylor [1974] AC 207: This case established that dependents can claim for the loss of financial support they would have received from the deceased. The court will consider the deceased’s earnings, potential future earnings, and the financial dependency of the claimant.
- Franklin v South Eastern Railway Co (1858) 3 H & N 211: This early case under the Fatal Accidents Act established the principle that dependents can claim for the pecuniary loss resulting from the death of a family member.
- Harris v Empress Motors Ltd [1984] 1 WLR 212: This case involved a claim for loss of financial support and services. The court considered the deceased’s contribution to the family business and the impact of their death on the business’s profitability.
- Hay v Hughes [1975] QB 790: This case highlighted the importance of providing clear evidence of the financial loss suffered by dependents. The court will scrutinize the financial records and projections to determine the extent of the loss.
- Cookson v Knowles [1979] AC 556: This case dealt with the calculation of damages for loss of dependency. The court emphasized the need to consider the deceased’s potential future earnings and the financial dependency of the claimants.
Practical Steps to prove Loss of Profits from a Business
- Gather Financial Evidence: Collect all relevant financial records, including business accounts, tax returns, and financial projections.
- Seek Expert Advice: Consult with financial experts to assess the value of the business and the financial loss resulting from the death.
- Legal Representation: Engage a solicitor experienced in fatal accident claims to ensure that all aspects of the claim are properly addressed.
Resources
- Fatal Accidents Act 1976
- Davies v Taylor [1974] AC 207
- Franklin v South Eastern Railway Co (1858) 3 H & N 211
- Harris v Empress Motors Ltd [1984] 1 WLR 212
- Hay v Hughes [1975] QB 790
- Cookson v Knowles [1979] AC 556
Loss of Business Dependency Claim under the Fatal Accidents Act 1976
One of the more recent and relevant cases under the Fatal Accidents Act 1976 is Paramount Shopfitting Company Ltd v Rix [2021] EWCA Civ 1172. This case involved a claim for loss of dependency, including loss of business income, shares, and capital.
Mr. Rix established a thriving construction and installation business, where he played a pivotal role as the driving force behind its success. His two sons were also involved in the business, with the plan for one to eventually take over. Mr. Rix owned 40% of the company’s shares, his wife held another 40%, and his sons owned the remaining 20%. Both Mr. Rix and his wife were directors and received income from the business. Following Mr. Rix’s death from Mesothelioma, his wife inherited his shares. Despite his passing, one of his sons assumed leadership, and the business continued to flourish, with profits steadily increasing.
A critical question arose: did Mrs. Rix suffer any financial dependency loss? The defence argued that she had inherited a “money-generating machine” and, since she continued to receive the same income as before, she experienced no financial loss. However, the Court of Appeal disagreed. They ruled that Mrs. Rix had indeed lost the financial benefits of her husband’s contributions—his skills, energy, and hard work that were essential to the business’s success. The court deemed the business’s post-death performance irrelevant to the claim.
The Court distinguished between income derived purely from capital and income generated by the deceased’s labour. According to Nicola Davies LJ, income can only be considered as coming from capital if it is received without the deceased’s efforts, making it passive. In Mr. Rix’s case, no part of the profits was untouched by his management and labour.
To quantify the loss, the court did not focus on the cost of replacing Mr. Rix’s services, as seen in cases like Cape Distribution v O’Loughlin [2001] and Welsh Ambulance Services NHS Trust v Williams [2008]. Instead, they assessed all the profits and earnings produced by Mr. Rix’s business, taking into account the practical realities of the situation.
Key Points from the Case:
- Loss of Dependency: The court considered the financial dependency of the claimant on the deceased, including the loss of income from the deceased’s business activities.
- Valuation of Shares and Capital: The court assessed the value of the deceased’s shares and capital in the business, taking into account the potential future earnings and the impact of the deceased’s death on the business.
- Income Assessment: The court evaluated the loss of income to the dependents, considering both past and future earnings that the deceased would have contributed to the family.
Implications:
- The case highlights the importance of a thorough financial assessment when claiming for loss of dependency under the Fatal Accidents Act 1976.
- It underscores the need to provide detailed evidence of the deceased’s contributions to the business and the financial impact of their death on the dependents.
Resources
What Evidence Do I Need to Support Loss of Profits Under Fatal Accident Claim?
For general information please read our Dependency Claims Guide for bereaved families and our Loss of Dependency Calculation Guide.
To support a claim for loss of business, including shares, capital, and income, under the Fatal Accidents Act 1976, the following types of financial evidence are typically required:
1. Business Financial Statements
- Profit and Loss Statements: These documents show the business’s revenue, expenses, and profits over a specific period.
- Balance Sheets: These provide a snapshot of the business’s financial position, including assets, liabilities, and equity.
- Cash Flow Statements: These show the inflows and outflows of cash within the business.
2. Tax Returns
- Business Tax Returns: These are essential to demonstrate the business’s income and expenses as reported to HMRC.
- Personal Tax Returns: If the deceased was a sole trader or had a significant shareholding, their personal tax returns may also be relevant.
3. Bank Statements
- Business Bank Statements: These provide evidence of the business’s financial transactions.
- Personal Bank Statements: If the deceased’s personal finances were closely tied to the business, these may also be necessary.
4. Shareholding Documentation
- Share Certificates: These prove ownership of shares in the business.
- Share Valuation Reports: These provide an assessment of the value of the shares at the time of the deceased’s death.
5. Capital Investment Records
- Investment Agreements: These documents show the terms and conditions of any capital investments made by the deceased.
- Receipts and Invoices: These provide evidence of capital expenditures.
6. Income Records
- Payslips: If the deceased was drawing a salary from the business, payslips will be necessary.
- Dividend Statements: These show any dividends received from shares in the business.
7. Business Contracts
- Client Contracts: These can demonstrate the business’s ongoing revenue streams.
- Supplier Contracts: These show the business’s obligations and expenses.
8. Insurance Policies
- Business Interruption Insurance: If applicable, this can provide evidence of coverage for loss of income due to the deceased’s death.
- Life Insurance Policies: These may also be relevant if they were intended to cover business-related losses.
9. Expert Reports
- Forensic Accountant Reports: These can provide an expert analysis of the financial impact of the deceased’s death on the business.
- Valuation Reports: These assess the value of the business and any shares held by the deceased.
10. Correspondence
- Letters and Emails: Any correspondence related to the business’s financial matters, including communications with clients, suppliers, and financial advisors.
Practical Steps
- Consult a Solicitor: It is crucial to seek legal advice to ensure that all necessary evidence is gathered and presented correctly.
- Gather Documentation: Collect all relevant financial documents and records.
- Engage Experts: Consider hiring forensic accountants or other financial experts to provide detailed reports and valuations.
Resources
