Taylor v O'Connor

JurisdictionEngland & Wales
JudgeLord Reid,Lord Morris of Borth-y-Gest,Lord Guest,Viscount Dilhorne,Lord Pearson
Judgment Date21 January 1970
Judgment citation (vLex)[1970] UKHL J0121-2
Date21 January 1970
CourtHouse of Lords
O'Connor (Widow)

[1970] UKHL J0121-2

Lord Reid

Lord Morris of Borth-y-Gest

Lord Guest

Viscount Dilhorne

Lord Pearson

House of Lords

Upon Report from the Appellate Committee, to whom was referred the Cause Taylor against O'Connor (Widow), that the Committee had heard Counsel, as well on Thursday the 20th, as on Monday the 24th and Tuesday the 25th, days of November last, upon the Petition and Appeal of Clive Russell Taylor, of 48 Lansdowne Road, London, W.11, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of Her Majesty's Court of Appeal of the 21st of February 1969, might be reviewed before Her Majesty the Queen, in Her Court of Parliament and that the said Order might be reversed, varied or altered, and that the Petitioner might have the relief prayed for in the Appeal, or such other relief in the premises as to Her Majesty the Queen, in Her Court of Parliament, might seem meet; as also upon the Case of Ellen O'Connor (Widow), lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Order of Her Majesty's Court of Appeal, of the 21st day of February 1969, complained of in the said Appeal, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, That the Appellant do pay, or cause to be paid, to the said Respondent the Costs incurred by her in respect of the said Appeal, the amount thereof to be certified by the Clerk of the Parliaments.

Lord Reid

My Lords,


The Respondent's husband died on 11th June, 1965, as a result of a car accident caused solely by the fault of the Appellant. She claims under the Fatal Accidents Acts on behalf of herself and her daughter. The trial judge awarded £54,196 as damages. This was affirmed by the Court of Appeal (Danckwerts and Sachs L.JJ., Winn L.J. dissenting).


The general principle is not in doubt. They are entitled to such a sum as will make good to them the financial loss which they have suffered and will suffer as a result of the death. But future loss is necessarily conjectural. If all had gone well the husband would have earned very large sums for a long period so that he could have maintained them at least at their standard of living at the time of his death and made other provision for their future. But all might not have gone well. Any of them might have died prematurely, he might not have been able to earn these sums and other misfortunes might have occurred: so allowance must be made for this.


The learned trial judge made a series of assumptions and calculations. With some I agree, others I doubt, and there are factors which he did not consider. So I think it best to start afresh and see whether the sum I would have reached is reasonably close to the sum awarded.


The deceased was a partner in a firm of architects which had a lucrative and increasing practice. His age was 53, his health was good, and he was devoted to his work. In 1961-2 his earnings were £7,281. In 1964-5 they were £14,890. It is agreed that during the next twelve years until he attained 65 his gross earnings would have been £21,000 per annum. They might have been more, but any additional earnings would have been subject to such heavy taxation that that possibility can be neglected. It is agreed that, assuming taxation to remain the same, that would leave him approximately £7,500 per annum free of tax. Out of that income he would have put £1,500 per annum back into the firm to provide additional working capital. So he would have had £6,000 per annum to spend or save.


I shall not go into the details of expenditure before his death because the figures we have are not very satisfactory. He had no expensive tastes or hobbies. He had not yet been able to save much and it is agreed that only £10,000 came to the Respondent on his death beyond some insurance money which must be disregarded. I think that a fair estimate is that he would have spent £1,000 per annum or thereby on himself and something over £3,000 in a manner beneficial to his wife and daughter leaving something under £2,000 per annum to be used as savings or in meeting the increasing cost of living or perhaps in some increase in the family standard of living.


It had been assumed that the wife's dependency ought to be calculated on the footing that it would have ceased when her husband ceased earning. I do not think that is right in this case. Before he reached 65 he would have been able to make ample provision for the future whether or not he survived and I think that, if one is to be realistic, dependency should be taken on the basis that she would be maintained at the same rate of expenditure throughout her life. We were informed that her expectation of life was about 21 years.


I regard this as the main element in the Respondent's claim and I think that any discount for contingencies should be comparatively small. She or her daughter would also have an interest in any capital which the deceased might have accumulated before his death. She might not have survived him but her daughter probably would have and it is not suggested that there was any substantial likelihood that the deceased would have done other than bequeath his estate to his wife or daughter. I shall deal with this separate element later. The only deduction to be considered in valuing the dependency arises from the fact that the Respondent was due to receive £10,000 from her husband's estate. I agree broadly with the learned trial judge's method of dealing with this. He deducted £250 from the annual value of the dependency but he started from a figure which is now agreed to be wrong. So I would deduct £200.


Damages to make good the loss of dependency over a period of years must be awarded as a lump sum and that sum is generally calculated by applying a multiplier to the amount of one year's dependency. That is a perfectly good method in the ordinary case but it conceals the fact that there are two quite separate matters involved—the present value of the series of future payments, and the discounting of that present value to allow for the fact that for one reason or another the person receiving the damages might never have enjoyed the whole of the benefit of the dependency. It is quite unnecessary in the ordinary case to deal with these matters separately. Judges and counsel have a wealth of experience which is an adequate guide to the selection of the multiplier and any expert evidence is rightly discouraged. But in a case where the facts are special I think that these matters must have separate consideration if even rough justice is to be done, and expert evidence may be valuable or even almost essential. The special factor in the present case is the incidence of income tax and, it may be, surtax.


The prudent person receiving a lump sum to make good his loss over a period is expected to invest it and to use it up gradually. If the period is a long one the multiplier will be much smaller than the number of years even where the contingencies which are allowed for are of small account. The reason is that while and insofar as the lump sum of damages is still unspent it will be earning interest and the damages and interest together will be adequate to last out for the period. But no account is taken of the fact that that interest will be subject to tax as unearned income. In the ordinary case the rate of tax payable by the recipient of damages will be small and to take tax into account would have a negligible effect on the final sum awarded.


But take the present case. The Respondent will have the £10,000 to which I have referred and damages in respect of ( a) loss of her dependency and ( b) loss of her interest in the savings which her husband would have made. The damages for the loss of dependency ought to be such that she will have available to spend each year free of tax a sum equal to the amount of the dependency. But if the damages are calculated without reference to income tax that will not be so. Suppose the damages are sufficient to buy an ordinary annuity for her life of that amount. Part of each year's annuity payment will be a return of capital and will not be taxable: but that part which is truly income will have to bear tax. So the amount available to her to spend will fall short of what it should be by the amount of that tax. The damages will therefore have to be increased by an amount necessary to counteract this short fall.


This short fall will be increased by the present high rates of interest. The present value of a series of future payments—in other words the cost of an annuity consisting of these payments—depends largely on the rate of interest and falls as that rate rises. So the taxable element in each annual payment of the annuity is larger when the rate of interest is high.


I have no means of knowing or even of estimating with any degree of accuracy by how much the damages in this case must be increased by reason of this factor. I do not even know at what rate the Respondent will have to pay tax if she has no other income than that which comes from the £10,000 to which I have already referred and the damages which she will now receive. She may even have to pay some surtax. In dealing with this matter of income tax we must I think proceed on the assumption that the widow has no private income of her own. If one took her private income into account that might increase the damages substantially. But in my view it would not be proper to do that.


If I were assessing damages I might have to neglect this factor by reason of the absence of evidence. But what I am trying to do is to see whether the learned trial...

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