PROVING THINGS 246: THE SELF EMPLOYED CLAIMANT AND LOSS OF EARNINGS: HIGH COURT DECISION

There are many difficult issues facing a self-employed claimant making a claim for loss of earnings.  This issue was considered by Neil Moody KC (sitting as a High Court judge) in Winterbotham v Shahrak  [2024] EWHC 2633 (KB).

Claims for loss of earnings of the self-employed and those involved in entertainment and sport: webinar 28th October 2024: Booking details available here

A self-employed person (including directors of small companies) face particular difficulties when seeking to recover loss of earnings after being injured. Similarly those who earn, or hope to earn, a living through sports and entertainment have particular difficulties in proving future prospects and earnings.

This webinar looks at the particular difficulties of acting for self-employed people who suffer loss of earnings due to injury, focussing on:

• The particular problems of the self-employed claimant
• When a claimant has not been fully declaring their income to the Inland Revenue.
• The injured business owner
• The effect of a limited company
• Calculating net loss

The webinar then goes on to look at issues in claiming losses in cases where the injured claimant earns, or hopes to earn, a living through sports and entertainment,  looking at cases where damages have been awarded and when a claim for “loss of chance” has been found to be appropriate.

The webinar looks at recent cases relating to self-employed claimants and those involved in sport, it identifies the practical difficulties these cases show and the best methods of overcoming them.

Those attending the webinar will also be sent “loss of earnings” questionnaire which has a specific section for self-employed/business owners.

THE CASE

The claimant established clinical negligence in relation to dental surgery. Her case was that, but for her injury, she would have worked full time as a speech and language therapist. As a result of the injury she could still work, but only in a very limited way.

THE JUDGMENT ON LOSS OF EARNINGS

The judge approached the issue in a very nuanced way. He accepted that the claimant could not work as she had before.   However he did not accept that she would have returned to work full time.  Damages were assessed on the basis that, but for the injuries, the claimant would have continued to work as a therapist with increased hours. As a result of the injuries she could now only work reduced hours.

The Claimant’s case as to her employment but for her injury

1. 1. Mrs. Winterbotham says that if she had not suffered her injury, she intended to return to a SLT role, similar to her previous role of about 14 hours a week, either in the NHS or in private practice through Cambridge Neuro-physiotherapy (which is her husband’s business). She says that, upon completion of her diploma in September 2021, she would have developed her counselling career. She would have worked five days a week, probably two days in SLT and three days in counselling. Her intention was to return to full-time work once her youngest child was at university (which I take to be in about 2021). She says that it would not have been difficult for her to return to the NHS. She would have worked for Choices and might have worked for Lifecraft for about a year, but she would not have worked for Camsight. She would have seen far more private counselling clients than she has been able to, and she would have hired a room in order to do this. She thinks that she would have seen an additional 8 to 9 clients each week, so around 18 clients a week in total. She would probably have worked into her early 70s, although she may have reduced her workload in her late 60s to about three days a week. She said that she would have been able to manage the continuing professional development required for two careers and denied that it would have been difficult to have more than one professional focus.

1. 1. Mrs Winterbotham’s account of her symptoms and her work was supported by a witness statement from her husband Mr. William Winterbotham, and his evidence was agreed. He says that he would have been able to provide private speech and language therapy work via his own business; indeed he has now engaged some of Mrs Winterbotham’s former colleagues. Mrs Winterbotham also relied upon the agreed witness statements of colleagues who work as counsellors or SLTs, Karen Johnston, Karen Pickin, Louise George, Chloe Brooker and Kay Rogers. I bear all this evidence in mind.

The Defendant’s case on loss of earnings

1. 1. The Defendant’s position is that, but for the injury, the Claimant would have worked as a counsellor, averaging three days a week and seeing no more than 18 patients. She would not have returned to work as a SLT and would have worked as a counsellor until a normal retirement age. It is submitted that the Claimant is not now prevented from working as a SLT, that the maximum number of counselling patients she would have seen in one day is six, and that, with suitable breaks she will still be able to see five patients per day.

Loss of earnings: assessment

1. 1. Before turning to the claim for loss of earnings, I note that the Claimant’s tax position is complicated because she has been in receipt of dividend income from her husband’s company, and income from a rental property. Accordingly I here make findings as to the gross past and future loss of earnings. I circulated a draft judgment to the parties which contained my findings and the parties have helpfully agreed the net figures and interest. These are set out in the Schedule attached to this Judgment.

Past Loss of Earnings

1. 1. The claim for past loss of earnings in the Schedule is put at £76,320. The claim is put on the following basis. It is said that, but for her injury, the Claimant would have undertaken the same work with Lifecraft and Choices, but she would have commenced her private counselling practice earlier in January 2022 (as opposed to October 2022), that she would have seen 14 clients until December 2023 and then increased the number to 18 clients per week from January 2024. In addition it is said that she would have resumed working as a SLT from October 2021, the work being split between the NHS and private clients referred via her husband’s firm. She would have worked for two hours per week with private SLT clients at the rate of £75 per hour, and spent 14 hours per week doing her NHS work, as she did until 2019.

1. 1. The Defendant’s position as set out in the Counter-schedule is that, but for the injury, the Claimant would have worked as a counsellor, averaging three days a week and seeing no more than 18 patients. She would not have returned to work as an SLT.

1. 1. The claim is thus put on the basis that the Claimant would essentially have returned to full-time work. In my judgment, this was unlikely. Mrs Winterbotham had not worked full time since 1999 and she combined part-time work with volunteering and a busy family life. She did not increase her hours as her children grew older. I note that the counselling witnesses relied upon by the Claimant all work for a maximum of three days a week. In my judgment, Mrs Winterbotham’s work-life balance would have continued to be important to her (as reflected in her comment on leaving the NHS). This is not to suggest that, as Mrs Winterbotham remarked, she would be “watching Richard and Judy”; rather it is a recognition that Mrs Winterbotham had other important priorities in life which included volunteering, supporting her family, helping others and seeing friends. In my judgment, Mrs. Winterbotham would have worked for about three or four days a week, which I take to be 3 ½ days per week as an average. In my judgment it is unlikely that she would have worked in to her early 70s. I consider it most likely that she would have worked to ordinary retirement age of 67.

1. 1. I address next to the question as to whether Mrs Winterbotham would have returned to work as a SLT. On one view it was an odd decision to resign from her NHS career in 2019 if (as is now said) she intended returning to it in 2021. Given that she was employed part-time for 14 hours a week, it might be thought that Mrs Winterbotham would have continued with her work whilst studying for her counselling diploma. Furthermore, as the Defendant points out, working in two separate capacities would have meant that Mrs Winterbotham needed two requirements for professional registration, training and CPD. Her case is put on the basis that she would have returned to the NHS rather than worked primarily in a private capacity, notwithstanding the higher rates that could be charged privately and the apparent ready supply of such work via her husband’s business. Given that she had left the NHS just two years earlier and retrained for a new career in counselling, I find on balance that Mrs Winterbotham would not have returned to the NHS. I accept that she may have wanted to continue working as a SLT, but I find that she would have done this in a private capacity, and on an ad-hoc basis as and when work was offered or she sought it via her husband’s company. The Claimant claims for 2 hours per week at £75 per hour for such private SLT work, and I consider that this is reasonable.

1. 1. Turning to counselling, I accept the basis for the Claimant’s calculation, namely that, but for her injury, she would have seen 14 private clients per week from January 2022 until December 2023, and would have increased the number to 18 per week from January 2024. This is consistent with the evidence of the other counselling witnesses who saw up to six clients per day and worked for three days a week. (My assessment that the Claimant would have worked on average for 3½ days per week would therefore be accounted for by two private SLT patients seen on one half day.)

1. 1. I calculate the past lost SLT earnings to be £150/ week x 46 weeks x 2.78 = £19,182 gross.

1. 1. As for the loss of counselling work, I accept the Claimant’s calculation at paragraph 2.2.1.1 of the Schedule, namely that there was a loss of 14 private counselling clients per week from January 2022 to September 2022, a loss of five clients from October 2022 to December 2023, and a loss of nine clients from January 2024 to the date of trial. I accept the pleaded rate of £50 per session, and I accept the Claimant’s estimate that she would have worked for 46 weeks per year. I therefore accept the Claimant’s estimate of her past gross loss of counselling earnings to be £47,480.25 as pleaded.

1. 1. The Defendant submitted that these are likely to have been face-to-face counselling sessions, and so the cost of renting a room should be deducted from this figure. The Defendant referred to the figure of £600/month paid by Karen Johnston, and I note that Louise George paid £8-£10 per hour for a room. Although the Claimant mentioned that she had a room at home that she might be able to use, she appeared to accept that she would need to rent somewhere if she developed a private practice to the extent claimed. In closing Ms Church submitted that the cost of a room could be offset against the increased rate which the Claimant could charge as her practice developed. It seems to me that the Claimant is less likely to have needed a room when she embarked on her practice, and more likely to have needed one as it developed. Looking at the matter broadly, I consider it reasonable to deduct £600/month from the gross claim but not for the entire period. The period which is the subject of the claim is 131 weeks, which I take to be 30 months, and I consider it reasonable to make the deduction for 20 months, so £12,000 falls to be deducted. This gives a gross loss of £35,480.25.

Future Loss of Earnings

1. 1. I turn next to the claim for future loss of earnings. The claim is put on the basis that the Claimant would have continued to work for two days per week doing SLT and three days per week counselling seeing 18 private clients per week. It is claimed that the Claimant would have worked until at least age 70.

1. 1. For the reasons set out above, I consider it unlikely that the Claimant would have worked for five days per week, and I consider it unlikely that she would have returned to the NHS. I find that she would have continued to do some SLT work, probably seeing two private patients per week at £75 per patient, a total for 46 weeks a year of £6,900. However, in my judgment the Claimant will soon be capable of seeing two SLT private patients per week. This is because, with CBT and the resolution of the litigation, it is to be expected that her perception of her pain will improve and so she will be capable of SLT work within limits as proposed by Ms Dhadda and accepted by Dr Taylor-Goh. I therefore allow this loss for one year which yields a figure of £6,900 gross.

1. 1. Once again, I accept that, but for the injury, the Claimant would have worked for three days a week as a counsellor seeing 18 private clients. She currently charges £50 per session. However she may soon be able to charge up to £95 per hour on the basis that she recently completed the REWIND course which is a specialist counselling technique for people with trauma and phobias. According to her witness statement this would enable her to charge “up to” £95 a session. Karen Johnston charges £50/ session and so does Louise George. Karen Pickin charges £50/ session but says that others “in the area and particularly closer to London” charge between £70 and £100. Taking account of this and the Claimant’s current charging rate, I allow £75/hour. Thus her annual counselling earnings, but for her injury, would have been £75 x 18 x 46 = £62,100 pa gross. From this would have to be deducted her expenses. I accept that Mrs Winterbotham would incur the pleaded costs of supervision (£810pa), a BACP membership fee (£246pa), and advertising (£228pa). It is pleaded that the cost of a room would be £100 per month. This seems to me to be too low, and I allow £600/month (as paid by Karen Johnston) for 46 weeks, ie £7,200 as provided for in the past claim. Thus the total expenses would be £8,484, leaving gross earnings after expenses of £53,616.

1. 1. According to the Claimant’s Schedule, her net self-employed earnings for the tax year ended 2024 were £9,203.52. The gross figure has not been given and I cannot determine how this figure has been made up. The Schedule sets out a compendious calculation which includes the Claimant’s dividend and property income.

1. 1. The Defendant submits that the better approach is to consider what work the Claimant has lost because of a need to take longer breaks between patients. That involves working out what the lost profit is by reference to the number of lost patients, less the additional business expenses needed to obtain that profit. In my judgment this is a fair and straightforward way of approaching the future loss, and I adopt it.

1. 1. The Claimant’s evidence is that she currently sees nine clients per week and this is the most that she can manage. I accept that the Claimant is and will remain restricted in the number of patients she can see. In my judgment, she is unlikely to be able to see more than four patients a day for three days a week, ie 12 patients a week at £75/ hour for 46 weeks a year. The same expenses will be incurred. Thus her residual earning capacity is £41,400 – £8,484 = £32,916.

1. 1. Thus the gross annual loss is £53,616 – £32,916 = £20,700.

1. 1. The multiplier for the “but for” earnings to age 67 is 11.93. The table C adjustment (employed, level 3, not disabled) is 0.82 and so the adjusted multiplier is: 9.78 which yields “but for” gross earnings of £53,616 x 9.78 = £524,364.

1. 1. There was a dispute between the parties as to whether the disabled multiplier should be applied to the Claimant’s actual projected earnings and the non-disabled multiplier should be applied to the “but for” earnings. The pain management experts agree that the Claimant is disabled within the definition of the 1995 Act. The Defendant submitted that the disabled multiplier should not be used since the Claimant’s disability would not impinge on her retirement age. I accept this this was the evidence of Dr Sawyer, and I accept that the likelihood is that the Claimant will be able to work to normal retirement age. However the adjustment does not just reflect the impingement of her disability on the Claimant’s retirement age. It also reflects the effect of her disability on her field of work. The commentary at paragraphs [89] to [91] of Facts and Figures sets out when a departure from the table A to D figures is appropriate. As the editors explain:

“[90] When considering whether it is appropriate to depart from the suggested Table A to D reduction factors, it is important to consider how the degree of residual disability may have a different effect on residual earnings depending upon its relevance to the claimant’s likely field of work. In this regard there is a distinction between impairment and disability. For example, a lower limb amputation may have less effect on a sedentary worker’s earnings than on the earnings of a manual worker. Likewise, cognitive problems may prevent someone from continuing to work in a professional or knowledge capacity where the same problems may not prevent continuing employment and job roles with low cognitive demands. In this context, disability is defined in relation to work and is specific to the skills that are required in a particular job and also to the outstanding effects of the impairment where barriers have not been overcome. Disability is more closely related to employment outcomes than is impairment. So, whilst occupation is irrelevant to impairment in this context, disability is defined in relation to work it is specific to the skills that are required in a particular job and also to the outstanding effects of the impairment where barriers have not been overcome. Disability is more closely related to employment outcomes than is impairment. So, whilst occupation is irrelevant to impairment (an amputation is the same regardless of the occupation), it is crucial to disability. Disability is the better predictor of employment prospects than the impairment itself and close regard must be given to the effects of the claimant’s impairments on his or her future intended occupation.

[91] Where a departure is considered to be appropriate, it could be in either direction and it would normally be expected to be modest. Interpolation using a midpoint between the disabled and non-disabled reduction factors is not advised. Disability results in substantial employment disadvantage and therefore applying a midpoint between the pre and post injury reduction factors will normally be too great a departure.”

1. 1. Mr Duffy’s primary position was that there should be no reduction to take account of disability. He did not advance an alternative approach based on interpolation. In my judgment the Claimant’s tongue is the tool of her trade (both as a SLT and a counsellor) and so her disability is intrinsic to her work. On this basis, and having regard to the guidance in Facts and Figures, I consider that the disabled multiplier should be applied to the residual earning capacity without any reduction.

1. 1. The adjusted multiplier for the Claimant’s residual earning capacity is therefore 11.93 x 0.62 (employed, level 3, disabled) = 7.27 which yields £32,916 x 7.4 = £243,578.40.

1. Thus the gross loss of counselling earnings is £524,364 – £243,578 = £280,786.