Placing a Value on Free Time in Loss of Earnings Cases

Consider a self-employed consultant who claims compensation for loss of earnings as a result of a personal injury. Suppose that the Claimant earned £30k pa before the accident and but has earned only £15k after the accident, as evidenced by accounting records. On the face of it, the Claimant has a claim for loss of earnings based on a multiplicand of £15k using an appropriate multiplier from the Ogden Tables.

However, it is sometimes the case that part of the reason for the fall in earnings is that the claimant’s injuries prevent him or her from attracting as much work after the accident as before it.

This can mean that the Claimant is unable to devote him/herself full time to the business simply because there is insufficient work to fill the working week. The Claimant, in these circumstances, may have a considerable amount of ‘free time’, which did not exist before the accident. This raises the question as to whether and, if so, to what extent, that free time ought to be taken into account for the purposes of the loss of earnings claim. Might it, for example, be open for the Defendant to argue that the Claimant’s duty to mitigate any loss extends to having to find an additional source of income to occupy the free time that has arisen?

It may well be that the additional income is deemed only to be paid at national minimum wage rates but it could still make a significant difference to the overall quantum of a claim.

As a first step, it would seem to be prudent for the terms of any instructions to forensic accountants to include not only an assessment of financial loss but also an assessment as to whether the accident has given rise to ‘free time’ for the Claimant. If it has, the arguments as to how it should be treated can then begin.

As an accountant; Roger Isaacs specialises within business turnaround and business valuation.

Posted in Blog, The Forensic Blog.