The Latest from Cloisters

News, Publications, Policies, Events and Blogs

Tom Coghlin helps family win right to claim lost death in service benefits

Tom Coghlin helps family win right to claim lost death in service benefits

Gary Fox died aged 44, just days after he was dismissed by his employer, British Airways plc. It was said that his dismissal was unfair and/or discriminatory. While in employment he had been a member of BA’s death-in-service scheme under which, if he died while in employment, payment would be made to beneficiaries (who would be identified by the trustees of the scheme) of a sum equivalent to three years’ annual salary, about £85,000.  Because he had been dismissed by the time of his death, no such payment was made.

The question was whether, in these circumstances, a claim for compensation for the full £85,000 could be maintained by Mr Fox’s estate.

By section 1 of the Law Reform (Miscellaneous Provisions) Act 1934, a person’s estate is entitled to pursue claims which the deceased could have pursued had he lived.  BA contended that the £85,000 death-in-service payment was by definition a benefit which Mr Fox could never have enjoyed had he lived, so he could never have been able to bring a claim for its loss.  Accordingly, the estate, standing in Mr Fox’s shoes, had no claim to that sum either.

The Employment Tribunal agreed with BA’s analysis and held that the loss of the full death in service benefit was not a loss of real substance to Mr Fox, but was in reality a loss to third parties (the putative beneficiaries under the scheme).  The estate therefore had no claim to the full amount.  Recovery was restricted to compensation for Mr Fox’s loss of “comfort of knowing that his relatives would receive a lump sum insurance payment on his death”. This was valued at £350, akin to a claim for loss of statutory rights.

In the EAT the President, Langstaff J, overturned the tribunal’s decision, holding that the death-in-service benefit was an asset of real value to Mr Fox that he had lost upon his dismissal. The fact that the money would have been paid to the beneficiaries was no reason to deny Mr Fox’s estate compensation for that loss.

The Court of Appeal upheld the decision of the EAT. Underhill LJ remarked:

“I believe that the law would be seriously defective if an employee were unable to claim compensation where such rights were adversely affected as a result of a wrong merely because the subject-matter of the right was a payment to be made to a third party; and all the more so since the potential beneficiaries of such a payment would themselves have no claim. I see no reason why that should be the case.”

The benefits in question formed part of the employee’s remuneration and the loss, or diminution in value, of a benefit was a pecuniary loss suffered by the employee.

The Court of Appeal also held that normally, where a claim has suffered the loss of a benefit such as life assurance, the appropriate measure of damage would be the cost of securing the equivalent benefit in the market.

An award of this kind was made in Knapton v ECC Card Clothing Ltd [2006] ICR 1084, a case that was considered by the Court of Appeal in Fox. The employment tribunal in that case included in the awarded of compensation for the dismissed employees the cost, at market rates, of acquiring cover to replace a life insurance benefit payable under the employer’s pension scheme. Interestingly in Knapton there was no question as to whether compensation should be given for such a loss. The only issue between the parties was whether the claimant should be entitled to recover compensation for the pre-hearing period when he had not attempted to purchase any cover and had survived to the date of the hearing.

However, in the particular and unusual facts of the current case, the tribunal must take into account the known fact of Mr Fox’s death. This was a case where the tribunal “need not gaze into the crystal ball when [it] can read the book”. The value to Mr Fox of the benefit was the same as the amount the beneficiaries would have received but for his dismissal, namely the full £85,000.

The matter will now proceed to the Employment Tribunal where issues of liability will be determined.

Tom Coghlin was instructed in the EAT and Court of Appeal by David Parry of Darbys LLP. 

Case summary provided by Sian McKinley

High court delivers judgment in favour of firefigh...
Cloisters' QCs involved in expert employment law c...