Fox v British Airways Plc

The Court of Appeal held that an employee (or his estate/personal representative) can recover in damages for the loss of a contractual death-in-service benefit even though the payment, if it had arisen, would have been made to third parties after the employee's death. The court applied the principle that benefits provided as part of the employee's remuneration "attach to the member" and so a diminution or loss of those benefits is a pecuniary loss suffered by the employee. The judgment relied on the reasoning in Auty v National Coal Board and other authorities on loss of pension and life-assurance type benefits and treated the loss in this case as, in substance, the loss of an entitlement that should be compensated.

The court emphasised that the result depended on the unusual facts (the employee died within weeks of dismissal) and that ordinarily the appropriate measure would be the market cost of equivalent life insurance or a valuation of a lost chance. The court also left open the question of whether any award should be discounted to reflect repayment of pension contributions already made to the estate.

Background and parties:

• The appellant, British Airways Plc, employed Gary Fox for over twenty years. After long sickness absence he was dismissed for medical incapacity with effect from 21 September 2010. He died on 16 October 2010. The respondent, Henry Fox (his father and personal representative), brought proceedings in the Employment Tribunal claiming unfair dismissal and/or disability discrimination primarily to recover the value of a contractual death-in-service lump sum payable under BA's pension scheme.

Nature of the claim and procedural history:

• The claim sought compensation for the loss of the death-in-service benefit (a lump sum equal to three times annual salary) on the basis that but for the dismissal the employee would still have been an active member at his death and the benefit would have been payable. The Employment Tribunal (Judge Hyams) held that compensation should reflect only the claimant's "comfort" in providing for relatives and awarded a small conventional sum. The Employment Appeal Tribunal (Langstaff J) allowed the claimant's appeal and declared that, if liability were established, the estate would be entitled to compensation equivalent to the full amount of the death-in-service benefit. British Airways appealed to the Court of Appeal.

Issues framed by the court:

1. Whether the employee (and hence his estate) could in principle recover damages for the loss of a death-in-service benefit payable to third parties after his death.
2. If recoverable in principle, how the loss should be quantified.

Court's reasoning and conclusions:

• The Court of Appeal applied established principles for assessing compensation in discrimination and unfair dismissal claims (and by analogy tort/damages principles), and confirmed that the estate stands in the deceased's shoes. The court concluded that a contractual entitlement to benefits under a pension or life-assurance type provision forms part of the employee's remuneration and that a loss or diminution of such benefits is a pecuniary loss suffered by the employee.
• The court relied on Auty v National Coal Board and subsequent practice permitting awards for diminution in widow's pensions and life-assurance style benefits, rejecting the argument that the loss was only one suffered by third-party beneficiaries.
• On quantification, the usual measure is the market cost of obtaining equivalent insurance. However, given the exceptional facts (death within weeks of dismissal), the court applied hindsight and held that the appropriate award in this case is the full amount of the death-in-service benefit (subject to possible discount for other payments received, such as the repayment of contributions already made to the estate).
• The court stressed the unusual nature of the facts and that in ordinary cases awards will be less than a certainty and measured by the cost of replacement cover or valuation of a lost chance.

Appeal dismissed. The Court held that the deceased employee (and therefore his estate/personal representative) could recover in damages for the loss of a contractual death-in-service benefit payable to others; given the exceptional facts (the employee died shortly after dismissal) the appropriate compensation in this case is equivalent to the full amount of the benefit, subject to any proper discount for other benefits received (for example repayment of contributions). The reasoning relied on the principle that pension and life-assurance type benefits form part of the employee's remuneration and on Auty v National Coal Board.

Employment Tribunal (Watford) — Employment Judge Hyams: held award should reflect only claimant's "comfort" and indicated small conventional sum; Employment Appeal Tribunal — Langstaff J ([2012] UKEAT 0033 12 3007; [2013] ICR 51): allowed appeal and declared estate entitled to compensation equivalent to full death-in-service benefit if liability established; Court of Appeal ([2013] EWCA Civ 972): dismissed BA's appeal.