Fox v British Airways Plc

A contractual death-in-service benefit is part of an employee’s remuneration even where it is payable, at trustees’ discretion, to third parties after the employee’s death. Its loss is therefore a pecuniary loss suffered by the employee, rather than an irrecoverable loss suffered only by the potential beneficiaries.

Ordinarily, loss of life assurance is valued by the cost of obtaining equivalent cover. Where subsequent events establish that death occurred while the employee would still have been in service, damages may instead reflect the full value of the benefit which would then have become payable. The assessment must use actual known events, not a fictional insurance premium calculated on assumed foreknowledge of death.

Gary Fox, a British Airways employee, was dismissed for medical incapacity after long-term absence. He died less than a month later. Had he remained employed, a pension-scheme death-in-service benefit of about £85,000 would have become payable at the trustees’ discretion to persons within specified beneficiary classes.

His father, acting for his estate, pursued unfair-dismissal and disability-discrimination claims. The Employment Tribunal limited any recovery to a modest sum for the comfort of knowing relatives might benefit. The Employment Appeal Tribunal allowed the father’s appeal and declared that, if liability were established, compensation was in principle the equivalent of the full benefit: [2012] UKEAT 0033 12 3007; [2013] ICR 51.

British Airways appealed on whether this was a loss suffered by Gary Fox and, if so, how it should be valued.

1. Appeal dismissed in substance. Underhill LJ gave the leading judgment, with which Pitchford LJ and Moore-Bick LJ agreed. If unfair dismissal or disability discrimination were established, the estate could recover compensation for the lost death-in-service benefit, subject to the statutory cap applicable to unfair dismissal and any proper discount for other benefits received.

2. The benefit was a contractual part of Gary Fox’s remuneration. Although he could not personally receive the payment and the trustees had discretion as to its recipients, he had a valuable contractual right to membership of a scheme which would provide that payment on his death. The loss of that right was his own pecuniary loss. It was not an attempt to recover a loss suffered by potential beneficiaries. The court accepted the reasoning in Auty v National Coal Board, [1985] 1 WLR 784, that scheme rights attach to the member.

3. The estate stood in Gary Fox’s shoes. Section 1(2)(a) of the Law Reform (Miscellaneous Provisions) Act 1934 did not bar the claim: it concerns post-death income losses and was introduced to reverse the lost-years decisions. Section 1(2)(c) was also inapplicable. The trustees’ discretion did not prevent an award, and no special trust over the compensation was required.

4. In an ordinary case, the proper measure for lost life-assurance cover is the cost of obtaining equivalent cover. Here Gary Fox had died at a time when, absent the alleged wrong, he would virtually certainly still have been employed. The court could take that known event into account, consistently with The Golden Victory, [2007] UKHL 12. The Employment Appeal Tribunal had wrongly treated the exercise as one of calculating a premium on an insurer’s assumed knowledge of the impending death. Nonetheless, the correct application of actual events meant that only an award of the full benefit could place the estate in the relevant position.

5. The Employment Tribunal could consider whether the £29,000 repayment of pension contributions and interest should be deducted. The EAT declaration was varied to make the assessment subject to any proper discount for other benefits received.

• Court of Appeal (Civil Division): British Airways’ appeal was dismissed in substance. The declaration was varied so that any award was subject to a proper discount for other benefits received.
• Employment Appeal Tribunal: Langstaff J allowed the father’s appeal and declared that, if liability were proved, the estate’s loss was in principle equivalent to the death-in-service benefit: [2012] UKEAT 0033 12 3007; [2013] ICR 51.
• Employment Tribunal: The tribunal had held that recovery should reflect only the employee’s comfort in knowing relatives might receive a benefit, rather than the benefit’s full value.