Supreme Court of Ireland Decisions

1. On the 28th May, 1995 Paul Downing was a passenger in a car driven by the defendant which collided with a tree on the boundary of a road as a consequence of which he was injured and as a result of which he died. The dependants of the deceased are Maureen Downing, mother; John Downing, brother; Joseph Downing, brother; Caroline Downing, sister; Clodagh Downing, sister and Katie Halpin to whom the deceased was in loco parentis.

2. Liability was not in issue. It was accepted that the accident and the death of Paul Downing were caused by the negligence of the defendant in the driving of his motor vehicle. The case proceeded as an assessment of damages only. The High Court ordered that the plaintiff recover against the defendant the sum of £56,862.50p and the costs of the action when taxed and ascertained. The sum of £56.862.50p was ordered to be apportioned among the dependants of the deceased as follows:

3. To Maureen Downing (mother of the deceased)

4. In lieu of support £10,000

5. Special Damages £10,000

6. Distress and suffering £7,500

7. To Katie Halpin (a minor to whom the deceased

8. On the issue of the payment to the child's mother McGuinness J. found:

9. Against that judgment the defendant appealed. The notice of appeal set out the following grounds:

10. The appeal proceeded on a single issue. On this matter being opened in the Supreme Court Mr. Fleck, S.C., counsel for the defendant, said that there was one issue for the Court and that was whether a claim for loss of dependency can be successful when based on [*5] undeclared income. He referred to Fitzpatrick v. Furey and Motor Insurers Bureau of Ireland (Unreported, High Court, Laffoy J., 12th June, 1998). In the instant case, referring to the evidence of the accountant, it was submitted that on that evidence the gross profit was

11. £12,000, on which income tax would be £3,000 and a possible PRSI liability of £1,000. Thus, the disposable net income was either £9,000 or £8,000 per year depending on whether or not the PRSI was deducted. This was a sum of either £173 or £153 per week. The claim on behalf of the dependants was that the deceased gave Ms. Halpin £150 per week. It was submitted that that would leave the deceased with either £23 or £3 per week to support himself.

12. Counsel submitted that Ms. Halpin received £150 per week from money on which tax was not paid. Thus, a public policy issue arose. The £150 per week was paid out of untaxed income and thus the claim for loss was tainted and the court should not support it. Counsel argued, on behalf of the defendant, that in considering a claim for loss of dependency it is contrary to public policy to take into consideration income that has not been taxed.

13. In the alternative it was submitted that compensation should be based on the net income the deceased would have received if he had paid tax. Counsel conceded that £150 had been paid per week to Ms. Halpin but argued that it had not been £150 net of tax, that in considering a payment on a loss of dependency it must be from a net income. In this case there was no evidence of net disposable income. If the starting block of funds for calculating the sum is not net of tax it is an inappropriate basis for calculating a dependency figure. The figure of £150 in this case is not net disposable income and so it is an inappropriate figure on which to base dependency figures.

14. Counsel asked the court to adjudicate a method for assessing loss of dependency when there had been a failure to pay tax or where a sum was not net of tax. [*6]

15. Counsel for the plaintiff, Mr. Kevin Cross, S.C., submitted that Fitzpatrick v. Furey and Motor Insurers Bureau of Ireland (Unreported, High Court, Laffoy J., 12th June 1998) does not govern this case. He argued that there had been an incorrect assumption on behalf of the defendant that the accounts as given to the court: (i) were the complete picture, and (ii) would have been the basis for a fraudulent taxation declaration. The Revenue Commissions had agreed a nil liability in this case. It was submitted that the accounts which show a net profit of £12,000 were not the full picture. It was submitted that the court must assume that if he had survived Paul Downing would have made full accounts and declarations. The fact that he may have taken cash from the till is not unlawful in itself, his obligation was to account to the Revenue. It was a thriving business. It was submitted that even if the £150 per week paid to Ms. Halpin was not recorded that is not important; the accounts were not accounts prepared for the Revenue with the purpose of defrauding the Revenue. It was submitted that to base the appeal on the book of accounts is not valid. There is no suggestion that had the deceased made a settlement with the revenue that he would not still have paid Ms. Halpin £150 per week. He agreed that it might be implied in the High Court judgment that the learned trial judge assumed it was untaxed income. That is a possible inference. Counsel submitted that even if it is accepted that it is a small business which would only give £8,000 off the top the future must be considered. It was open to the learned trial judge to accept future improvement would continue and that £150 would continue to be paid even if the deceased paid tax. He submitted that the judgment of the learned trial judge should stand.

16. The accounts in this case were not accounts which had been prepared by the deceased. [*7] The situation is described in the evidence given on 5th May, 1999 in the High Court by Mr. Gerard O'Donnell as follows:

17. On cross examination it was stated:

18. There was evidence regarding a further liability to tax of £1,000 for that year. In

19. £8,000 a year. The evidence followed that:

20. The payment of £150 per week made to Ms. Halpin is not contested on this appeal. There is no contest on this fact. There is no issue of credibility. Thus, no question arises as to the truth of the evidence of Ms. Halpin. McKenna v. McElvaney, McElvaney and MIBI (Unreported, High Court, Johnson J., 24th July, 1998) is distinguishable.

21. Counsel for the defendant referred the court to Fitzpatrick v Furey and the Motor [*12] Insurance Bureau of Ireland (Unreported, High Court, Laffoy J., 12th June, 1998). There the case was advanced on the basis that for the year ended 31st July, 1994 Mr. Fitzpatrick earned £6,000 more than was declared to the Revenue Commissioners.

22. On this Laffoy J. held:

23. I am satisfied that this may not be the correct approach in assessing loss for dependants on declared and undeclared income. Of course the circumstances of each case should be considered. However, in general it would appear appropriate to calculate the loss to the dependants (which has been sustained because of the action of the defendant) on the actual income. If the income, or part of it, has not been declared or taxed then the sum should be analysed to achieve a net figure, net of tax. This net figure would then be the basis on which the loss to the dependants may be calculated.

24. The learned trial judge calculated damages having regard to the overall income of the deceased. The accounts in this case were not full, they were drawn up for the Court by an accountant "doing the best" he could. They were not drawn up by the deceased. The accountant had difficulty making up the accounts because of the absence of records. Even though the accounts were not full it is quite clear that the deceased's new business was successful and was growing. There is no reason why this business would not have continued to develop and grow were it not for the untimely death of the deceased. It is appropriate to take into account such future considerations. It is probable that in due course the deceased would have made formal accounts and paid taxes. No matter what might be said of the figure of £150 it is difficult to imagine a sum for the child being less than £37.50. On any view the £37.50 would have been available to the child and I would not interfere with that award. It is reasonable to assume, in view of the fact that the business was developing, that even on tax being paid the deceased would have been in a position to continue to pay £37.50 per week to Ms. Halpin for the child. Also, that the deceased would have continued to benefit his mother [*14] to the value of £1,000 per annum. Consequently, I am satisfied that on the probable net profits the sums of £37.50 per week for the child and £1,000 per annum for the mother are reasonable sums. I would not disturb the award made by the High Court It would be preferable to have exact figures for gross income, tax liabilities and projections for the future. However, in the circumstances of this case I would not remit the matter to the High Court to obtain precise figures.

25. For these reasons I would dismiss the appeal.

26. This is an appeal against the damages as assessed by the High Court in proceedings where the Plaintiff/Respondent, as the administrator of the estate of Patrick Paul Downing, deceased, claims damages on his own behalf and on behalf of all other dependants of the deceased against the Defendant/Appellant. The claim arises out of death of the deceased which occurred on the 28th May, 1995 when he was a passenger in a car driven by the Defendant which collided with a tree. The essential facts of the case and the nature of the award made in the High Court are detailed in the judgment of Mrs Justice Denham and it is not necessary for me, except in a limited way, to refer to them. I propose to focus on the central point of law raised by the Appellant in the appeal.

27. The submissions of Counsel for the Appellant centred on the basis on which the learned trial judge assessed damages for future loss which she awarded to a child in [*2] respect of whom the deceased stood in loco parentis. The award was based on regular payments which had been made by the deceased to the child's mother out of gross income on which tax had not been paid. Counsel contended that the learned trial judge was incorrect in only having regard to the deceased's gross income when calculating the child's future loss. It was common case that the deceased had not made tax returns nor paid income tax on his income. He submitted that in determining the amount of continuing future contributions which the deceased would have made to the upkeep of the child the learned trial judge was not entitled to ignore the fact that the due and proper payment of income tax on his gross earnings would have reduced his disposable income from the gross figure to a net after tax figure and thereby affect the amount of such financial contribution.

28. He contended that it would be contrary to public policy if damages for future loss of income or, as in the case, a dependant's loss, were determined without taking into account income tax payable on that income or on the source of that income.

29. In support of his submission Counsel cited the judgment of Laffoy J. in Fitzpatrick v. Furey and the Motor Insurers Bureau of Ireland ( 12th June , 1998, unreported). In that case Laffoy J. appears to have determined that in assessing damages for future financial loss to be awarded to the dependant's of a deceased, income undeclared for income tax purposes should, as a matter of public policy, be entirely excluded from such an assessment, and should be based solely on the income which had been declared for tax purposes [*3]

30. In this case the deceased had not declared any part of his income although his estate subsequently reached a nil settlement with the Revenue Commissioners. Counsel for the Appellant did not go so far as to adopt completely the approach of Laffoy J. He did not argue that the entire amount of an undeclared income should be excluded when damages for loss of income or a dependant's loss are being assessed. Counsel submitted that such losses must be determined on the basis of the net income after tax which the deceased would have received. In this I think he is quite correct and it is an approach which is consistent with the approach which is, as I understand it, generally followed by the courts in cases of this nature.

31. If the full import of Laffoy J,'s judgement is as stated above I am of the view that it is not the appropriate basis for assessment of such damages. Nor do I consider gross income a correct basis for such assessment.

32. The 'dominant' principle, as it has often been described, in the award of damages is restitutio in integrum. In other words, the court should award the injured party such damages as will put him or her in the same position as he or she would have been if he or she had not suffered the wrong complained of. The corollary to this is that in a claim for financial loss the injured party is, in principle, not awarded damages which exceed his or her actual loss. (I leave out of consideration such heads of damage as exemplary damages which are irrelevant here and not generally relevant in cases of this nature).

33. It seems to me that public policy intends that persons who have suffered financial loss as a result of the wrongful act of another be compensated for their actual loss and no more. In my view, therefore the application of the fundamental principle of restitutio in integrum is a sufficient basis to exclude in assessing claims for loss of future income, including those which incorporate an element of undeclared earnings, any element based on gross rather than net income after all lawful deductions.

34. In short damages in personal injury or fatal accident cases are, in principle, simply compensation for actual loss and this is particularly evident in the case of special damage. In this context, once liability and actual financial loss have been established the duty in law of the wrongdoer to compensate the injured party by way of damages cannot be abated by the fact that the claim is based, in whole or in part, on undeclared income, once the actual future loss is calculated by reference to the net income after tax. Moreover, it could be said that answerability of the taxpayer to the Revenue authorities for the sole fact of a failure to make a return of income (as opposed to taking account of the tax liability) is truly res inter alios acta. [*5] Public policy considerations may arise in a different way should the trial judge, in the exercise of his or her discretion having regard to all the circumstances of a case involving undeclared income, consider a matter sufficiently grave as to warrant papers being referred to the appropriate Revenue authorities.

35. In the course of his submissions, Counsel for the Appellant drew the courts attention to a number of authorities concerning the assessment of damages for loss of income where the source of that income has been some form of illegal or criminal activity. In this case the deceased had a perfectly legitimate business as the owner of a fruit and vegetable shop. It is not necessary, therefore, to review those authorities.

36. For the foregoing reasons, I conclude that the appropriate approach to the assessment damages for loss of earnings or financial loss suffered by a deceased's dependant, whether the claim is based in whole, or in part, on undeclared income, is on the basis of net income after the tax and other lawful deductions which have or should be made in respect of such income.

37. It follows that in this particular case the learned trial judge should have approached the assessment of damages of future loss of financial contribution to the child in question on the basis of the deceased's net income after deduction of the amount of income tax which, having regard to the evidence before her, he would have been liable to pay.

38. Accordingly I would dismiss the appeal.

39. This is an appeal from a judgment of the High Court (McGuinness J) in a fatal injury action. There are good and sensitive reasons for not going into the facts in too much detail. It is sufficient to state that the deceased contributed £150 per week to the household of a girlfriend with whom he had previously been living and with whom he was still in constant contact at the time of his death. That household consisted of the girlfriend, two children of hers by a previous broken marriage and a third child, Katie Halpin, who it is agreed was a "dependant" of the deceased within the meaning of Part IV of the Civil Liability Act, 1961. It is also not seriously in dispute that the deceased was particularly devoted to that child.

40. The deceased, Paul Downing, was also helping his mother by giving her approximately £1,000 per annum. [*2]

41. As far as loss of dependency is concerned the claim was confined to the losses of the child Katie Halpin and the mother Maureen Downing.

42. McGuinness J awarded £29,362.50 for the loss of dependency of Katie Halpin and £10,000 for the loss of support to Maureen Downing. These figures were calculated on the assumption that the respective payments of £150 per week in the case of the Halpin household and the £1,000 per annurn to the mother would have continued. The learned trial Judge took the view that £37.50 being one quarter of the £150 was an appropriate assessment of Katie's weekly loss and she also held that as a matter of probability that would have remained a loss until Katie attained the age of 18 years.

43. There was no precise mathematical calculation done in the case of Mrs Downing's loss because the Judge considered that she had to take into account the possibility of the deceased marrying even though the mother had given evidence that she did not think that the son would have ever married. In all the circumstances the trial Judge considered that a sum of £10,000 to the mother would be reasonable. At the time of his death the deceased had been running a small retail business. Accounts were prepared since his death for the respective years ending 31st December 1992, 31st December 1993 and 31st December, 1994. It would appear there had never been returns made to the Revenue Commissioners but on foot of the accounts prepared after the death the Revenue Commissioners agreed a nil liability. If the accounts accurately reflected the income of the deceased he could not have afforded to have made the payments to the Halpin household or indeed to his mother. The finding of fact that those payments were made is [*3] accepted by the Appellant but what is suggested is that they must necessarily have been paid out of undeclared income. The issue on the appeal and it is the only issue is whether the learned High Court Judge was entitled to take the view that those payments in those amounts would have continued or whether she should only have awarded sums net of tax with the necessary corollary that the amount of tax would have been properly proved before her. Counsel for the Defendant Mr Fleck, SC, makes the latter argument on two alternative fronts. On the one hand he says that the Court as a matter of public policy cannot take income which ought to have gone to the Revenue Commissioner into account and alternatively, he says that even if a public policy point does not arise the Court is still obliged to assume that tax would have been paid had the deceased survived. As I understand his argument, he did not go so far as to adopt the view taken by Laffoy J in Fitzpatrick .v. Furey (unreported judgment delivered 12th June, 1998) that as a matter of public policy no account at all can be taken of untaxed income even including the net income which would have been available if tax had been paid. That may be an overstatement of the view taken by Laffoy J as the facts in the Fitzpatrick Case are quite different from the facts in this case. I will return to it later on in the judgment.

44. It is quite clear to me that Mr Fleck's argument in the abstract is absolutely correct though I would prefer to put it on the second alternative basis. It would seem to me that the true principle is that in assessing loss of contribution for the future in a fatal injury action the Court must assume that had the deceased lived he would have properly paid his taxes as and from his death whatever might have been his conduct before his death. If, therefore, a judge, as in this case, believed that a payment of £150 per week was made to the Halpin household and also believed that payments amounting to approximately £1,000 per annum were made to [*4] the deceased's mother then prima facie the judge was entitled to take the view that such payments would have continued. However if it was demonstrated as in this case that such payments could only have been made out of untaxed income the Judge must then take that into account and must assume that tax on all income would have been paid from the death. This does not necessarily mean however that the Judge would then arrive at the view that the contributions would have been reduced by reference to the tax paid. It entirely depends on the overall facts which the Judge accepts. In this case it is quite clear that McGuinness J took the view that as a matter of probability income was to use her words "extracted from the till in cash”. She points out in her judgment that the accountant who gave evidence, Mr O'Donnell, admitted that the accounts were not complete and that this would be a fairly common experience in a small retail business such as the type of business being run by the deceased . She accepted the evidence that in the case of such a business "the accounts are not all that terribly reliable”. She goes on to express the view that she was satisfied on the evidence that money was taken out in cash and she backs up this view by pointing to the evidence of Ms Halpin to the effect that "there was never any shortage of money”. It follows therefore that although the argument put forward by Mr Fleck is correct in principle there is no evidence that the trial Judge neglected to apply the correct principles in this case. She merely took the view that there was plenty of surplus money in reality and that contributions of the amount alleged could have been afforded by the deceased and would have been likely to have been paid. The trial Judge was entitled to take that view having regard to the evidence as a whole. I would therefore dismiss the appeal.

45. As heavy reliance was placed by the Defendants on the judgment of Laffoy J in Fitzpatrick v. Furey cited above I think that I should make some observations on it. The case was a fatal [*5] injury claim arising out of the death of a dental technician and a specialist in prosthetics. In that case the amounts of the contributions to the members of his family were being calculated by reference to his income. I do not think that there was any evidence in that case of the amounts of actual contributions made in the lifetime except presumably in a very general way. That is the first point of distinction on the facts between that case and this case.

46. It emerged in the evidence that the profit earned by the deceased exceeded by £6,000 the sum declared to the Revenue Commissioners. The second distinguishing factor between that case and this case is that in that case a false declaration had been made by the deceased to the Revenue Commissioners and indeed a further false declaration had been made by his widow, the plaintiff, after his death. The fact that false declarations were made by the deceased and the plaintiff would seem to have strongly influenced the decision of Laffoy J. The learned Judge acknowledged that there was some force in an argument apparently put up by Counsel for the Plaintiff that while in the ordinary way there might be considerable difficulty in advancing a claim in which the future loss of earnings element was predicated on an income level different from that which had been returned to the Revenue Commissioners historically the position was different in relation to dependants in a fatal injury claim. Counsel had submitted that the Court should find a balance between what was the reality of the situation and the income as declared to the Revenue Commissioners. Otherwise he pointed out that the Plaintiff and her children would be prejudiced because of the loss of support and the lifestyle they enjoyed would not have happened but for the wrongdoing of the Defendant.

47. Nevertheless, Laffoy J came down in favour of the Defendant observing as follows: [*6]

48. If I understand the judgment of Laffoy J correctly she took the view that the whole of the £6,000 should be disregarded. I would respectfully disagree with this approach. I think that in the Fitzpatrick Case both sides wrongly argued it on foot of " public policy consideration” whereas the true analysis should have been as to whether the trial Judge had before her sufficient evidence in relation to undeclared income that she could quantify what would have been the net amount of that income if tax were paid. I think that the learned trial Judge should have assumed that the deceased would have paid tax had he survived. Public policy considerations did not dictate that the entire of the £6,000 if properly proved should be disregarded. It is not necessary for the Courts to take such a severe view as apart from anything else it could work great hardship and injustice in other hypothetical cases. The true principle is that a defendant should never have to compensate for alleged loss of monies which ought to have gone to the Revenue Commissioners and should not have been retained by the deceased. But the principle does not go beyond that. I have already expressed the view that there is no evidence before this Court which would indicate that McGuinness J applied the wrong principles.