Deborah Head (Executrix of the Estate of Michael Head Deceased) v The Culver Heating Company Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Bean,Lord Justice Males,Lady Justice Andrews |
| Judgment Date | 18 January 2021 |
| Neutral Citation | [2021] EWCA Civ 34 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: B3/2019/1562 |
| Date | 18 January 2021 |
[2021] EWCA Civ 34
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
HER HONOUR JUDGE MELISSA CLARKE
CO/4645/2018
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Bean
Lord Justice Males
and
Lady Justice Andrews
Case No: B3/2019/1562
Harry Steinberg QC and Kate Boakes (instructed by Fieldfisher LLP) for the Appellant
Michael Kent QC (instructed by BLM) for the Respondent
Hearing date: 16 December 2020
Approved Judgment
Michael Head was born on 11 August 1958 and as a young man in 1974–79 (and again briefly in 1980–81) was exposed to asbestos while working for the Defendant company. Later he became the founder and managing director of his own heating and ventilation company, Essex Mechanical Services Ltd (“EMSL”). In December 2017 he began to experience symptoms of mesothelioma. Within a matter of weeks it became apparent that the disease would take its inevitable and fatal course.
Mr Head issued a claim for damages in the High Court on 19 September 2018. On 28 November 2018 Master Gidden entered judgment for damages to be assessed; it appears that the Defendant reserved the right to argue contributory negligence but in the event that was not pursued. An order was made for an expedited trial in the specialist mesothelioma list.
Mr Head gave evidence before a court examiner on 12 December 2018, as a precaution in case he were to die or suffer a further deterioration in his health preventing him from giving evidence at trial. As it turned out he was able to give evidence at the trial, which took place before Her Honour Judge Melissa Clarke on 11–12 April 2019.
Some of the items of damage were not in dispute. The judge made agreed awards totalling £80,688.10 and the Defendant also agreed to indemnify Mr Head against the cost of medical treatment during what little time remained to him. The judge heard submissions on what level of award was appropriate for pain and suffering and loss of amenity and made an award of £95,000, against which there has been no appeal. But on the principal issue, namely what damages should be awarded for Mr Head's “lost years” claim the parties were very far apart indeed. Mr Steinberg QC and Ms Boakes contended for an award of £4,421,683. Mr Kent QC argued that there should be no award at all. The judge accepted the submissions of Mr Kent and valued the lost years claim at zero.
I have a good deal of sympathy for the judge. This was not a straightforward case: and her task was made more difficult by the absolutist submissions on behalf of the Claimant, and the almost equally absolutist submissions on behalf of the Defendant.
The judge refused permission to appeal to this court. A renewed application was initially refused by Simler LJ who considered it on the papers but, following an application made by Mr Steinberg and Ms Boakes under CPR 52.30 and the principle in Taylor v Lawrence, she revoked her order refusing permission and referred that question for determination by the full court at a rolled-up hearing. The overwhelming majority of Taylor v Lawrence applications are entirely unfounded but this one was a rare exception, perhaps the most striking one I have seen during six years' service in this court. For the reasons which follow I consider that it was indeed necessary to reopen the determination of this appeal in order to avoid real injustice. We granted permission to appeal at the outset of the hearing before us.
Mr Head died on 7 November 2019, that is after the trial and the judgment at first instance. His widow was appointed to carry on the appeal, by order of Master Bancroft-Rimmer dated 11 February 2020, as executrix of Mr Head's estate. However, the case remains as it was at trial, a claim by Mr Head and now by his estate rather than a claim by his dependants under the Fatal Accidents Act 1976.
Findings of fact about EMSL and Mr Head's role in it
The narrative of how Mr Head had established EMSL and the part he played in it was undisputed. The judge said:-
“24. Mr Head founded and has been running a heating and ventilation services business since 1987. He is currently the managing director of EMSL, a company that he incorporated in 2004.
25. There are three other directors, who are his wife, Mrs Deborah Head, and their two adult sons, Dale and Aaron, all of whom work for ESML. Mrs Head is also the Company Secretary.
29. Mrs Head works for EMSL doing administrative work relating to the Servicing Business for two days a week, one of which she often works from home. …
30. Mr Head, Dale and Aaron work full time for EMSL. Dale Head is 32 years old and has worked for EMSL since he was 17. Aaron is 26 years old and has worked for EMSL since he was 20, having first obtained a University degree. Dale fulfils a management role, and it is intended that he should take over as Managing Director when Mr Head is no longer able to work. Aaron works ‘on the tools’. Both were made directors of EMSL in April 2016, before Mr Head's diagnosis. Mr Head's evidence is that he appointed them because it was time…….
32. Each of the directors takes a salary from the company. In the year ended 30 April 2018 the salaries were £45,533 for Mr Head, £46,483 for Mrs Head, £52,738 for Dale and £37,277 for Aaron……
36. EMSL has historically not paid out all of its profits. Mr Head has chosen to leave in EMSL profits which are not extracted from the company by way of dividends declared and paid or directors' salaries. Those go to improve the net asset value of EMSL. He explained in oral evidence that the financial stability of EMSL is a key part of his management strategy and accordingly EMSL carries no indebtedness beyond trade debts.
37. It does not appear to be disputed that Mr Head is the driving force behind the business. Mr Head said in oral evidence “I head up the company. I built it over many years. I make the decisions in relation to the direction the company goes in. I am involved on a daily basis with it. I tender and price contracts. I negotiate with clients. I have good personal relationships with the company's clients over many years which has led to the prosperity of the company”. Mrs Head in her witness evidence said it was “essentially… Mike's business. He built it up from scratch. He made all the contacts and is the force behind everything”. She puts the success of the business down to Mr Head's efforts and expertise.
38. Mr Head described in his oral evidence a change in strategy in [the] direction of EMSL that he had devised and implemented in 2014: (i) to avoid external borrowings; (ii) focus on leveraging existing very close and long-standing customer relationships by entering into direct contracts with those customers rather than tendering for numerous subcontracts; and (iii) focus on a high level of customer service, by delivering innovative solutions on time and on budget, which requires a high degree of skill in problem-solving and pricing contracts. It is the delivery of that strategy that has been his personal responsibility, rather than the execution of the work, which has been for his employees. I am satisfied that the success of that strategy is what has caused what the experts have identified as an increase in the profitability of EMSL since 2014.
39. Also not disputed is Mr Head's evidence that if he had not contracted mesothelioma, his intention would have been to work full time until 65, reducing to about 80% from 65 until 70. After 70, he intended to maintain a ‘front of house’ presence working at about 50%, continuing to maintain client relationships and acting as wise counsel for his sons, no longer taking a salary although continuing to receive dividends on his shares. His intention, and that of the rest of the family, was that as he reduced his involvement in the company the responsibilities of his sons Dale and Aaron would increase, with Dale eventually taking over as Managing Director.
…
44. Mr Head confirmed in oral evidence that he doesn't fear for the company, inasmuch that he trusts his sons, he thinks they are capable, and he has no fears, for example, about EMSL going out of business, but he sees the accelerated timetable for handover to his sons from that which he otherwise anticipated as introducing uncertainty about EMSL's profitability in the future. Mrs Head says that she does fear for the profitability of EMSL, as she thinks her sons “simply have not got the years behind them to have the requisite knowledge to run the company”.
…
73. I am satisfied on the evidence before me that EMSL is a successful business, with a strong financial foundation, with an established reputation, which will continue to be managed by family members in whom Mr Head reposes trust. There is no evidence before me that the customers with whom Mr Head through EMSL has built up a trusted relationship over decades will not continue to rely on EMSL once it is managed by Mr Head's sons. After all, those carrying out the actual work (i.e. the employees and sub-contractors) will not change, and Mr and Mrs Head's evidence was that there was no intention that the strategy of EMSL would change. For those reasons, I accept the opinion of the expert forensic accountants that it is more likely than not that the profitability of EMSL will not diminish following Mr Head ceasing to be actively involved in the company and Mr Head's estate will continue to have the benefit of income from capital in the form of dividends payable on his shareholding in EMSL.
…
93. Accordingly, I am satisfied that Mr Head's real loss of earnings or earning capacity includes 90% of EMSL's profits after directors' salaries and corporation tax, subject to a deduction equal to the value of Mrs Head's...
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Deborah Head (Executrix of the Estate of Michael Head, deceased) v The Culver Heating Company Ltd
...as the claimant. She successfully appealed against the finding that no award should be made in respect of the lost years claim: [2021] EWCA Civ 34. That component of the claim has been remitted for re-determination in accordance with the Court of Appeal's judgment (see paragraph 37 2 It is......