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The "Anomalous" Fatal Accidents Act

Those are not my words but the view expressed on 2 April by Lord Sumption on the effective over-compensation which can result under the Fatal Accidents Act 1976 (“the FAA”). The other Supreme Court Justices agreed with him. He expressed the view that, “What is clear is that sections 3 and 4 [of the FAA] mark a departure from the ordinary principles of assessment in English law, which can fairly be described as anomalous”. This was in a Supreme Court case which had to decide whether in a foreign accident case to apply German principles of assessment of damages (effectively full compensation) or English law in the form of the FAA: Cox v Ergo Versicherung AG (formerly known as Victoria) [2014] UKSC 22.

Ironically, the German principle, which the Supreme Court ultimately found to apply, was identical to the English law principle of damages assessment, in the absence of any other statutory rules to the contrary, such as the FAA. That familiar principle is to put the Claimant in the same financial position, neither better nor worse, as she would have been in if, in that case, her husband had not been fatally injured by the Defendant’s negligence. The same principle of course applies to compensation under the English common law. This takes account of (rather than ignoring to the Claimant’s benefit) any mitigation of loss and credit must be given for receipts referable to the original loss, subject to the limited exceptions such as the benefit of insurance policies. But of course the position is different under the FAA. That expressly excludes from consideration the potential financial consequences of re-marriage or the prospects of re-marriage from consideration when assessing damages for loss of dependency, by section 3:

“(3) In an action under this Act where there fall to be assessed damages payable to a widow in respect of the death of her husband there shall not be taken account the re-marriage of the widow or her prospects of re-marriage.”

It is also well-known that the FAA also excludes from consideration any financial benefits flowing from death by section 4:

“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.”

Hence, rather than applying the principle of full compensation, putting the Claimant back in the position he or she would have been but for the accident (and in these circumstances death of a spouse), the FAA disregards and does not require credit to be given for benefits and mitigation of losses. So in the Cox case, where the widow had entered into a new relationship and had two children with her new partner, under the FAA, the financial support provided by her new partner would have been disregarded. Under German law (and general principles of English law on damages, save for the effect of the FAA) credit would need to be given for that financial support to reduce the damages award reflecting the actual loss.

The effect of the FAA may be seen as reflecting the obvious sympathy for and desire to be generous towards those who have been bereaved.They are living with the loss of a loved one as a result of a tortfeaser’s negligence. But this is perhaps reflective of more traditional family arrangements and finances than those seen in today’s society. Indeed, the terminology of section 3 referring only to a widow’s re-marriage (and not a widower’s) harks back to a different era. Lord Sumption is not the first senior judge to question the effect of the FAA. As long ago as Cookson v Knowles [1979] AC 556, one of the seminal cases on the calculation of fatal accident damages and multipliers, Lord Diplock called sections 3 and 4 “an artificial and conjectural exercise…[whose] purpose is no longer to put dependants, particularly widows, in the same economic position as they would have been in had their late husband lived.” As Lord Sumption notes in Cox, others have gone further. Atiyah’s Accidents, Compensation and the Law, 8th ed (2013), described damages for bereavement as “highly objectionable” (p.89) and the exclusion of maintenance from a subsequent remarriage being taken into account when assessing damages as “one of the most irrational pieces of law ‘reform’ ever passed by Parliament” (p.133).

In the event, the Supreme Court decided that German law applied on this point and hence the principle of full compensation, with credit where losses had been mitigated, applied. So the widow, Mrs Cox, had to give credit for the financial support she received from her new partner.

The observations of the senior judiciary that the FAA is anomalous, whilst being plainly legal rather than political observations, may strike a chord with those in government and the civil service looking to reduce the level of compensation generally. The current focus on "whiplash damages" (itself a legally and medically unsound construct) is likely to be a first step rather than a one-off in damages reform. Reversing sections 3 and 4 of the FAA may be thought to be unpalatable as the effect would be to reduce the compensation available to grieving relatives. But recent reforms have shown that such qualms are unlikely to dissuade those looking for ways to reduce the level of awards, costs or volume of claims. This is especially so in areas where the public purse is affected and fatal accident (including fatal clinical negligence) compensation is certainly one of those areas.

It would be no surprise to see reform in this area in the not too distant future. By reform, I am not referring to the long-called for expansion in the scope of the definition of dependants able to claim or (substantially) increasing bereavement damages and the scope of those entitled to them. Those reforms have long been pressed for by the Law Commission1 and others in the decades since the FAA was enacted. Moves to expand the class of beneficiaries of bereavement damages, under the Civil Law Reform Bill 2010, were shelved by the incoming Coalition Government in January 2011, which said in a statement that “in the present financial situation we need to focus our resources on delivering our key priorities.” So there is no prospect of the sort of primary legislation required to make fatal accident damages more widely available, let alone more generous, in the current economic and political climate.

What I anticipate are moves to bring the calculation of fatal accident damages in line with the assessment of restitutionary damages under common law generally by the abolition of sections 3 and/or 4. Interestingly, abolishing the section 4 disregard was one of the proposals of the Law Commission in its 1999 report, albeit as part of the above reforms to widen the class of persons able to pursue claims for financial dependency and increasing the level and scope of bereavement damages. So the award of restitutionary damages to Mrs Cox, arising out of the death of her husband in Germany, may become the rule rather than the exception in all fatals claims, if the reforms I anticipate are brought forward.

1. See for instance the Law Commission’s report on “Claims for Wrongful Death” almost 15 years ago in November 1999: http://lawcommission.justice.gov.uk/docs/lc263_Claims_for_Wrongful_Death.pdf