Pre-accident earnings – tax evaders

| The Practical Lawyer |

How should the court deal with a loss of earnings claim when earnings have been derived, in whole or in part, by unlawful or illegal means (eg without having paid any tax or NI)?

The traditional approach is to allow recovery to reflect the validity of the claim, but to then take the particular circumstances of the claim (ie the illegality) into account when deciding the amount of damages. For instance, in Newman v Folkes [2002] PIQR QBD (CA) the claimant had never paid IT or NI on his income and had no books or accounts. His failure to pay tax did not debar him from advancing a claim for past or future loss of earnings. He was entitled to rely on the loss of his income, although it would be necessary for the court to make adjustments for the unpaid tax and NI. He therefore recovered loss of earnings despite his conduct being described as ‘little short of scandalous… a concoction of lies and deceit’.