BRITISH ASBESTOS NEWSLETTER

Humane Decision by House of Lords in Fairchild Case

On June 20, 2002, contentious judgments of the High Court and Court of Appeal were overturned in a remarkable ruling by the House of Lords (newsletter issues 42-44 & 46)¹. In a decision which will, no doubt, provide rich source material for legal commentators and innovative solicitors for years to come, the Law Lords allowed the appeals of all three asbestos claimants in what has become known as the Fairchild case². Considerations of public policy and a reliance on common sense permeate the lengthy document while phrases such as: "recognising and righting wrongful conduct," "instinctive sense of justice," "the concepts of fairness, justice and reason" and "a broader view of causation" demonstrate judicial awareness of the appalling injustice meted out to asbestos victims by the lower courts. Compensation will now be paid to Mrs Fairchild, Mrs Fox and Mr Matthews of £155,000³, £115,000 and £155,000 respectively. Amongst asbestos claimants, there was an overwhelming sense of relief at the verdict. Judith Fairchild said: "We got the right result, not only for myself but the thousands affected by this awful disease. My husband deserved to win." The Fairchild case was funded by Mr Fairchild’s trade union: UCATT. According to UCATT Leader George Brumwell: "The judgment is indeed a landmark judgment and will change the lives of hundreds who are suffering and thousands to follow." Five hundred asbestos cases for UCATT members will now proceed. After the decision, asbestos victims’ groups throughout the country experienced a surge of enquiries. John Flanagan from the Merseyside Asbestos Victims’ Support Group said: "Our group has represented scores of people who, like Mr Fox, were exposed to asbestos while working at the Liverpool Docks. This legal battle has been a David and Goliath struggle which has demanded great courage and stamina from all the claimants. The refusal of Mrs Fox to accept the insurer’s last minute offer was pivotal in ensuring the case proceeded. I am delighted that common sense has prevailed."

Anthony Coombs, of Manchester firm John Pickering & Partners, which represented two of the appellants, welcomed the landmark judgment: "The impasse which has prevailed since the judgment by Mr Justice Curtis (February 1, 2001) has finally ended. Hundreds of mesothelioma and asbestos cancer cases can now proceed. It is significant that their Lordships attached weight to the approach that would be taken overseas, and particularly in European jurisdictions. Lord Bingham said: ‘in a shrinking world (in which the employees of asbestos companies may work for those companies in any one or more of several countries), there must be some uniformity of outcome, whatever the diversity of approach in reaching that outcome.’ But I am concerned that the effect of this decision will be to redouble the insurance industry's efforts to transfer the cost of occupational disease to other parties and, perhaps through discussions behind closed doors with government departments, the TUC and individual Union leaders, try to bring about a regime under which industrial disease victims will receive far less compensation than they now do under the court system."

At the heart of the appeal to the Lords was the issue of causation. If it is not scientifically or medically possible to establish which particular asbestos fiber led to the disease contracted by the injured, can negligent employers be held liable? Although Arthur Fairchild had been negligently exposed to asbestos by two former employers, Mr. Justice Curtis could not decide "from which source of exposure came the single asbestos fibre, or if it be the case, the fibres, responsible for the malignant transformation of the pleural cell. It follows the exposure causing the disease could be at either of the named premises or in combination - and none are more likely than the other." The Court of Appeal upheld the Curtis logic in a decision handed down on December 11, 2001. Appeal Court Justices Brooke, Latham and Kay denied compensation to the asbestos claimants on the grounds that mesothelioma "is a single indivisible disease … and a claimant cannot establish on the balance of probabilities when it was he inhaled the asbestos fibre, or fibres, which caused a mesothelial cell in his pleura to become malignant."

Fortunately, Lords Bingham, Nicholls, Hoffman, Hutton and Rodger did not agree. Acknowledging the importance of Fairchild, regarded by some as the most important occupational disease case in history⁴, their Lordships reviewed jurisprudence from as far afield as Australia, Austria, Canada, Germany, Greece, Italy, France, the Netherlands, Norway, South Africa, Spain, Switzerland and the United States; references were also made to the opinions of classical Roman jurists: "The problem of attributing legal responsibility where a victim has suffered a legal wrong but cannot show which of several possible candidates (all in breach of duty) is the culprit who has caused him harm is one that has vexed jurists in many parts of the world for many years … The texts show that, in a certain form, problems with unidentifiable wrongdoers had begun to exercise the minds of Roman jurists not later than the first century BC … Julian considers whether someone 'kills' a slave for these purposes if he mortally wounds him and later someone else attacks the slave who dies more quickly as a result. Julian takes the view, which was probably not shared by all the jurists, that both persons who attacked the slave should be liable for 'killing' him."

Each of the Law Lords provided reasons for supporting the asbestos claimants. In the densely reasoned lead judgment, Lord Bingham questioned the acceptability of applying an "exclusive criterion of causation" in cases where there are multiple guilty parties. He concluded: "there is a strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to so, when the harm can only have been caused by breach of that duty and when science does not permit the victim accurately to attribute, as between several employers, the precise responsibility for the harm he has suffered. I am of (the) opinion that such injustice as may be involved in imposing liability on a duty-breaking employer in these circumstances is heavily outweighed by the injustice of denying redress to a victim. Were the law otherwise, an employer exposing his employee to asbestos dust could obtain complete immunity against mesothelioma (but not asbestosis) by employing only those who had previously been exposed to excessive quantities of asbestos dust. Such a result would reflect no credit on the law." Although Lord Nicholls concurred: "Any other outcome would be deeply offensive to instinctive notions of what justice requires and fairness demands," he insisted that basic legal principles had not changed. While the standard of causation had been relaxed to prevent an injustice to the Fairchild plaintiffs, judicial restraint was required to prevent the application of this principle from becoming "a source of injustice to defendants … Policy questions will loom large when a court has to decide whether the difficulties of proof confronting the plaintiff justify taking this exceptional course." Focusing on the case of Mr. Matthews, Lord Hoffman was in no doubt: "The Court of Appeal was in my opinion wrong to say that in the absence of a proven link between the defendant’s asbestos and the disease, there was no "causative relationship" whatever between the defendant’s conduct and the disease. It depends entirely upon the level at which the causal relationship is described. To say, for example, that the cause of Mr Matthews’ cancer was his significant exposure to asbestos during two employments over a period of eight years, without being able to identify the day upon which he inhaled the fatal fibre, is a meaningful causal statement … My Lords, as between the employer in breach of duty and the employee who has lost his life in consequence of a period of exposure to risk to which that employer has contributed, I think it would be both inconsistent with the policy of the law imposing the duty and morally wrong for your Lordships to impose causal requirements which exclude liability."

The McGhee and Wilsher cases were pivotal points of reference for Lord Hutton who, applying the McGhee principle, concluded "that the breach of duty by each defendant materially increasing the risk of the onset of mesothelioma in Mr Fox, Mr Fairchild and Mr Matthews involved a substantial contribution to the disease suffered by them … Therefore each defendant is liable in full for a claimant’s damages, although a defendant can seek contribution against another employer for causing the disease." Lord Rodger also relied on McGhee: "Following the approach in McGhee I accordingly hold that, by proving that the defendants individually materially increased the risk that the men would develop mesothelioma due to inhaling asbestos fibres, the claimants are taken in law to have proved that the defendants materially contributed to their illness." Responding to accusations of "rough justice" dispensed under McGhee, Lord Rodger was unwavering: "The men (claimants) did nothing wrong, whereas all the defendants wrongly exposed them to the risk of developing a fatal cancer, a risk that has eventuated in these cases. At best, it was only good luck if any particular defendant’s negligence did not trigger the victim’s mesothelioma. The defendants, in effect, say that it is because they are all wrongdoers that the claimants have no case. In other words: the greater the risk that the men have run at the hands of successive negligent employers, the smaller the claimants’ chances of obtaining damages."

There is considerable debate on whether the Lords’ decision signals a U-turn on causation. One asbestos specialist believes that the strict conditions laid out in the judgment will limit its usefulness; nevertheless, she admits that litigators may try to build on the ruling in the future. Andrew Hogarth, junior counsel for Mrs Fairchild, concurs: "All five judges were concerned to make clear that their decision should be used only in limited circumstances." As for the future, Hogarth says: "The House of Lords did consider that there may be some extension of the principles in Fairchild to other types of case, but said that they would consider each on a case by case basis in order to decide whether the same policy considerations applied." Andrew Parker, from Beachcroft Wansbroughs, warns defendants that although the Lords intended "their decision to be of limited effect, seeking to relax the principles of causation in certain specified circumstances … The hidden danger in this judgment lies in Lord Bingham’s acceptance that the principles may be of wider application …" After the insurance industry’s jubilation at the earlier Fairchild rulings, the success of the appeals must have been most unwelcome. One anxious insurance analyst has commented: "It shifts the burden to the defence - which is a big step for English law to take." Andy Cook, writing in the Insurance Times, complained: "the Law Lords are punishing the industry as a whole rather than looking for where the true liability lies … The bottom line is that some companies will be penalised without being responsible. And that’s sad."⁵ Another worry for insurers is that the House of Lords’ ruling could improve litigation prospects for lung cancer plaintiffs. According to Frank Burton QC "Claimants (pre-Fairchild) have been extremely reluctant to contest actions for damages for asbestos-induced lung cancer in the absence of asbestosis or bilateral pleural thickening. However, the tide may be said to be turning both in respect of the statistical and scientific evidence now available and the success of the legal arguments in Fairchild … Lung cancer is an indivisible injury and it was accepted by the Defendants in Fairchild that such injuries were not subject to rateable proportion on a time exposed/intensity basis as occurs in divisible diseases such as asbestosis."⁶ Throughout Fairchild, it was apparent that insurance companies and the body which represents them, the Association of British Insurers (ABI), were working together to ensure the early judgments were upheld. According to an insurance recovery expert losing the case may signal an end to industry cooperation: "The Fairchild ruling means that multiple (insurance) companies will be liable under multiple years of coverage … As the number of claims rise and the available reserves decrease, it is probable that carriers will start pointing fingers at each other." The ABI has estimated that mesothelioma compensation could cost the industry £200 million ($350 m) a year.

If the House of Lords judgment was the third act in the Fairchild Saga, the curious, some might say sordid, developments which took place in April were the second. To put these events in context, it is necessary to look at what happened a few months previously. Although it recognized the existence of a "major injustice crying out to be righted either by statute or by an agreed insurance industry scheme," the Court of Appeal denied Fairchild, Fox and Matthews leave to appeal to the House of Lords. Petitions were nevertheless submitted to the Lords and on January 30, 2002 the House of Lords granted leave to appeal to Mrs Fox and Mr Matthews. On January 31, the Lords refused permission to appeal in the Fairchild case; this decision was overturned and an expedited hearing of the three appeals was scheduled for April 22-24. On April 9, Frances McCarthy, President of the Association of Personal Injury Lawyers (APIL) was informed by the ABI that a voluntary insurance industry compensation "scheme" for mesothelioma victims was being drafted. The next day, she received a one page document outlining the proposals. This information was also communicated to the Trades Union Congress. APIL members were unimpressed by plans for compensation to be made on a proportionate time-exposed basis as this would significantly decrease the size of awards. While the burden of proof would remain on claimants, no indication was given as to who would assess damages (in this void, it was assumed the insurers would take on the task. It was not overly cynical to predict a serious conflict of interest.)

On April 18, McCarthy informed the ABI that APIL would not recommend the insurers’ proposals. Sir Sydney Kentridge QC, the appellants’ lead counsel, was highly critical of the "so-called scheme under which claimants would have to prove the elements of exposure, breach of duty and quantum of damage. The draft scheme does not say before what sort of tribunal they have to do this or whether they simply have to satisfy the insurers … the whole object of these so-called offers and this so-called scheme is to ensure that the Court of Appeal decision remains intact." These suspicions were confirmed by Lord Brennan QC, who represented the defendants in the Fox case; he told the House of Lords: "The settlement proposal is to avoid the appeal being heard - it is quite obvious - and to preserve the status of the Court of Appeal judgment. A litigant is entitled to seek to exercise his right to achieve such an end if it is in his view appropriate …" Disapproval of this strategy was not confined to the legal profession. On April 23, one hundred MPs signed an Early Day Motion⁷ (EDM 1186) condemning "the insurer’s last minute offer to settle Fairchild, Fox and Matthews mesothelioma cases as a cynical and underhanded attempt to prevent the cases being heard by the House of Lords, hence leaving hundreds of other cases at the mercy of last year’s Court of Appeal judgment; and regrets that it has caused the claimants to have to wait another month to find out whether they can have their compensation."

Piecing together information contained in a published account of the next two weeks⁸ with the court transcript from the April 22 hearing at the House of Lords, the following timetable emerges. Mrs Fox received a without prejudice offer late on April 17 (Wednesday); the deadline for acceptance was 2 p.m. on April 19 (Friday). On April 18 (Thursday), Mrs Fox and her brother-in-law, the brother of the late Mr. Fox, met with her solicitors in Liverpool. At that time, she declined the offer; she subsequently rejected it on two further occasions. Late on April 18 (Thursday), solicitors representing Mr Matthews and Mrs Fairchild received similar offers; their deadline was 4 p.m. on April 19. All the offers were conditional upon acceptance by each of the claimants. While Mr Matthews and Mrs Fairchild were inclined to accept, Mrs Fox was resolute.

Meanwhile, back in London, a new element was thrown into the mix. The law firm of Beachcroft Wansbroughs, not previously involved, was now acting for the defendants in the Fox case, Spousal Midland Ltd. The firm submitted an unsigned petition to the House of Lords on April 17 stating: "The present appeals will be settled by the payment of damages and costs." It is clear from the times and dates cited in the previous paragraph, that this "was a statement which at the time no one was entitled to make." On April 18, Lord Hunt⁹, the senior partner from Beachcroft Wansbroughs, personally informed Mr Vallance-White in the Judicial Office of the House of Lords "that all three appeals had been settled." According to Sir Sydney this assurance was "quite misleading. In the case of at least one of the appellants and possibly two, no offer had yet reached them. No attempt was made to get the consent of the appellants’ solicitors. No one told counsel about it … It plainly was not so." On the evening of April 18, the House of Lords was informed that the cases had not settled and they were re-listed. Unfortunately, by the time this happened the appeal date had been lost. There was widespread concern and disappointment at the behaviour of the defendants. Sir Sidney described the manner in which the hearing was postponed as a "sordid attempt to manipulate the judicial process." Nigel Bryson, of the GMB trade union agreed: "This was a cynical attempt to prevent the cases being heard. Offering compensation to these three claimants at such a late stage was not a solution to the Fairchild problem. If the Court of Appeal judgment stands many GMB members and other asbestos victims will be barred from bringing legal actions." Instead of the hearings beginning on April 22 as originally scheduled, a meeting to discuss the case took place in Committee Room One at the House of Lords. Lord Brennan argued that as the defendants were willing to pay full compensation and all costs, the plaintiffs no longer had a valid cause of action: "if a claimant’s claim is met in full, then the House (of Lords) does not regard itself as having a discretion to continue to hear the matter unless it’s a public law case …" It was not usual for the House of Lords to hear a case which had been settled, Lord Brennan explained; should their Lordships choose to consider the petitions, they would be expanding the "previous approach to these questions." He urged their Lordships: "to dismiss the petitions on the basis that there will be payment of damages and costs in full." Speaking for the appellants, Sir Sydney was clear - there was no settlement: "Mrs Fox has rejected the offer. The offer has lapsed, but quite apart from that, Mrs Fox, who was interviewed by her solicitors on three separate occasions on separate days has said 'no.' She was made fully aware of the consequences not only to her but also unfortunately to Mr Matthews and to Mrs Fairchild, who would be minded to accept those offers if they were open."

After a fifteen minute recess, Lords Bingham, Nichols, Hutton, Hale and Hoffman expressed their regret and dismay at the recent course of events and announced that the appeals "should be heard at the earliest possible moment." That the cases were rescheduled for May 7-9 is proof of the urgency with which the litigation was viewed. On May 16, Lord Bingham took the unusual step of informing the parties orally of the success of all three appeals; the reasons for the judgment were to be supplied at a later date. Lord Bingham was moved to make this early announcement, he said, because of the predicament of one of the appellants; it was clear he was referring to the deteriorating health of Mr Matthews. The judgment was greeted with relief by scores of MPs who on May 16 signed an Early Day Motion (EDM1334) entitled "Law Lords Victory for Asbestos Sufferers." The politicians welcomed "the House of Lords decision that has reversed the controversial appeal court judgment in the case of Fairchild and others; acknowledges it is a victory for justice and fairness and that thousands of families will now be able to obtain compensation; recognises the commitment and determination of UCATT to obtain justice for its members; and calls on the insurance industry to settle cases honourably and expeditiously because they are under public scrutiny."

Even in the midst of the post-Fairchild celebrations, Solicitor Anthony Coombs sounded a note of caution about what insurers might do next. He was right to do so. What the insurers could not achieve by a judicial route might well be pursued by a legislative one. Several sources have reported that the ABI has been engaged in behind-the-scenes talks with the Treasury, the Financial Services Authority, the Health and Safety Executive, the Confederation of British Industry, the unions and others over possible solutions to the insurance industry’s difficulties with employer’s liability policies. On July 4, an article entitled: Current EL system must go, was published in The Insurance Times. Reporter Andy Cook confirmed that at a meeting between ABI representatives and Treasury officials earlier that week, John Parker, Head of General Insurance at the ABI, said: "We put the view that the current EL system is not sustainable." The same John Parker reacting to the House of Lords announcement on May 16 had promised that: "Insurers will pay compensation within the law as set down and interpreted today. Insurers reserve for these sorts of claims … We anticipate that similar claims falling within this judgment should now be handled quickly and the ABI will be providing advice to our members as soon as we can." Had there been a drastic change during the six weeks between the two statements or was one comment for public consumption and the other for privileged ears only? Even more illuminating, perhaps, is a comment by Phil Bell, Technical Manager for the Royal & SunAlliance. Bell claims: "The current regime was set up to deal with workplace accidents - like slips, trips and falls - not long-tail industrial diseases … We would want to see the exclusion of industrial disease from any future legislation." Although the insurers are pushing for government intervention they are realistic enough to expect delays: "We think it would be suitable for next term." These and other attempts to off-load asbestos liabilities will continue to cause concern amongst asbestos victims and their representatives, nevertheless the Fairchild decision is a victory which should be recognized. It is doubtful whether this result could have been achieved without the hard work and dedication of the appellants’ legal team and the asbestos victims’ groups, health and safety campaigners, politicians and journalists who worked so hard to keep asbestos high on the national agenda during the desperate sixteen months between the Curtis and Lords’ judgments.

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¹ The judgment can be found on the website: http://www.parliament.the-stationery-office.co.uk/

² The case of Fairchild v Glenhaven Funeral Services Ltd. & Others was only one of three cases heard by the Lords; the others were Fox v Spousal (Midlands) Ltd. and Matthews v Associated Portland Cement Manufacturers Ltd. and Others.

³ Although the sum of £155,000 was awarded to Mrs Fairchild, she received a total of £191,000 which included interest from the date of the High Court hearing (February, 2001).

⁴ "Court of Appeal makes one of the most significant decisions in the history of insurance law," is a quote taken from an article which appeared in an insurance journal.

⁵ What's fair about Fairchild? by Andy Cook, Insurance Times, May 23, 2002.

⁶ Lung cancer, asbestos exposure, and smoking after Fairchild-v-Glenhaven Funeral Services Ltd. by Frank Burton QC, a lecture given in London on July 11, 2002.

⁷ An Early Day Motion is a device used in the House of Commons to draw MPs attention to issues of importance that are not generally expected to be debated.

⁸ Fairchild, Fox & Matthews: story so far by Rodney Nelson-Jones APIL Newsletter vol 12, issue 3, pages 19-21.

⁹ It is of interest to note that Lord Hunt of the Wirral is the Honorary President of the All Party Parliamentary Group on Occupational Safety and Health .

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Compiled by Laurie Kazan-Allen

Ó Jerome Consultants