England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE CCRTF 96/0701/C

(HIS HONOUR JUDGE HAGUE QC )

Royal Courts of Justice

Strand

London WC2

Tuesday, 22 July 1997

B e f o r e:

LORD JUSTICE BELDAM

LORD JUSTICE SIMON BROWN

LORD JUSTICE WALLER

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JOHN ALBERT NEAL

PLAINTIFF/APPELLANT

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GREGORY CHARLES BINGLE

DEFENDANT/RESPONDENT

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(Transcript of the handed down judgment of

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

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MR R SMITH (Instructed by Messrs Kleinman Klarfeld, Middlesex, HA7 4AW) appeared on behalf of the Appellant

MR D TUCKER (Instructed by Messrs Greenwoods, London WC1B 3HL) appeared on behalf of the Respondent

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J U D G M E N T

(As approved by the Court )

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©Crown Copyright

Tuesday, 22 July 1997

J U D G M E N T

LORD JUSTICE BELDAM: The appellant Mr. John Albert Neal, now sixty years of age, appeals from the decision of His Hon. Judge Hague QC sitting in the Slough County Court on 8th May 1996 awarding him £4,450 damages for personal injuries he suffered in a road accident on 14th January 1989. The defendant had admitted liability to compensate the plaintiff but contested the nature and extent of the injuries which the plaintiff claimed he had suffered and the period of disability attributable to them. In summary, the plaintiff who was fifty-two at the time, claimed that he had suffered injury to his neck and lower back which had rendered him unfit for work from the date of the accident until trial.

The defendant’s case was that the plaintiff had not worked for a considerable period prior to the accident and it was unlikely that he would have done so had the accident not occurred. Because of pre-accident disability he was incapable of work. Insofar as the court might find on the evidence that the plaintiff was not capable of work, it was due to pre-existing orthopaedic problems with his lower back and not due to the accident. Further, if as he contended he was capable of light work, he had chosen not to obtain such work.

The judge found that, although the plaintiff suffered a whiplash injury to the neck as a result of the accident, the disability in his lumbar spine pre-dated the accident and was due to a previous accident when he fell from a ladder in 1986.

From about 1980 the plaintiff had worked as a self-employed builder and decorator doing some small building work but, after completing a profitable contract in South Africa in 1985, he returned to the United Kingdom and in May 1986 fell off a ladder while working on his own house. Since that time he had not done any work at all. Thus at the time of the road traffic accident he was in receipt of income support and other Social Security benefits.

After the accident on 14th January 1989 the plaintiff was taken to Edgware General Hospital and detained for two nights for observation, returning as an out patient two weeks later. It was agreed at the trial that he suffered a minor head injury and was knocked out for about a minute and that he had suffered the whiplash injuries to his cervical spine in the accident. However the judge found that those injuries had settled down over time and by the date of the hearing the plaintiff had recovered from them. The parties agreed that the appropriate award for general damages for the whiplash injury and minor concussion should be £4,000. The plaintiff had spent approximately £450 in fees for treatment from an osteopathic doctor which he was also entitled to recover. The plaintiff had claimed that all his disabilities were due to injuries sustained in the road accident but the judge found that his lumbar spine had not been injured and that the only injury for which he was entitled to compensation was the whiplash injury.

Having made these findings, the judge turned to the question of special damages. He rejected the plaintiff’s claim for loss of earnings and loss of the opportunity to take light, sedentary employment. Thus the judge found that the plaintiff had suffered no loss of earnings as a result of the accident.

At the date of the accident the plaintiff was in receipt of Social Security Benefit. The plaintiff had received Social Security benefit payments from the date of the accident to 14th January 1994, the relevant period for the purposes of the Social Security Administration Act 1992, amounting to £30,201.27. The Compensation Recovery Unit of the Department of Social Security (“CRU”) had issued a Certificate of Total Benefit (“the CRU Certificate”) in this sum on 19th May 1995. The CRU stated that the Certificate showed the amounts of benefit paid to the plaintiff because of his injury in the road accident on 14th January 1989. Under the relevant provisions relating to the recovery from damages of sums equivalent to benefit contained in the Social Security Act 1989 and re-enacted in the consolidating Social Security Administration Act 1992, this sum formed the basis of the deduction from the amount of any compensation payment made by the defendant to the plaintiff, and required to be paid by the defendant to the Secretary of State. As the stated sum greatly exceeded the damages awarded, and was payable out of any payment “falling to be made ... to ... the victim in consequence of the injury”, the whole of the general damages would be extinguished and the plaintiff would receive nothing. To preclude this possibility the plaintiff adopted the solution suggested by Henry L.J. in his judgment in Hassall v The Secretary of State for Social Security [1995] 1 WLR 812. At page 819 he endorsed the suggestion of Mr Burrell QC, put forward in an article in Issue 2/94 of “Quantum”, that in such circumstances the plaintiff could claim as special damage the loss of “unrecoupable” benefits he was receiving before the accident. Prior to the accident the plaintiff had been receiving income support on the basis of his availability for work which was not deductible from any sum received as damages. Because he was injured in the accident and was no longer available for work, the benefits he received became deductible from any compensation he might recover. Depending on the findings of the judge at trial, he could suffer a loss of general damages because of his disability. Accordingly he was entitled to claim that he had lost the Social Security benefits he was receiving before the accident which were not deductible from any compensation.

In the present case the judge held that such a claim was not sustainable. Consequently the effect of his judgment was that the plaintiff received no general damages at all. The plaintiff appeals contending that the judge wrongly rejected his claim to be entitled to the loss of the benefits he had been receiving before the accident. In the course of argument before the judge, counsel realised that the medical evidence required the judge to decide the length of the plaintiff’s disability due to the injuries sustained in his accident, so they asked the judge to make a finding when, if he had not had his pre-accident condition, the plaintiff would have been able to sign on as able to accept work if it was offered to him. As the Social Security Administration Act 1992 contains provisions for review of and appeal from the matters set out in the CRU Certificate, such a finding was perceived by counsel to be potentially important to both parties. However the judge declined to make any such finding. For the purposes of the appeal, the matter having been raised by the court in the course of argument, the parties agreed that the plaintiff would have recovered from the effects of the accident by 14th January 1991. Thus the period of disability as a result of the injuries attributable to the accident was, on the facts found by the judge, two years. If the CRU Certificate was amended to accord with the judge’s finding, the amount paid to the victim in respect of the accident would be £10,869.45.

Sec. 2 of the Law Reform (Personal Injuries) Act 1948 provided:

“(1) In an action for damages for personal injuries ... there shall in assessing those damages be taken into account against any loss of earnings ... which have accrued or probably will accrue to the injured person from the injuries ... one half of the value of any rights which have accrued or probably will accrue to him therefrom in respect of Industrial Injury Benefit, Industrial Disablement Benefit or Sickness Benefit for the five years beginning with the time when the cause of action accrued. This sub-section shall not be taken as requiring both the gross amount of the damages before taking into account the said rights and the net amount after taking them into account to be found separately.”

Provision was made in sub-section (iii) in assessing the damages to ignore any finding of contributory negligence so that the deduction of one half of the benefits was made from the total damages for loss of earnings. It is unnecessary to consider the historical reasons for these provisions. They gave rise to no difficulties in practice but, as the cost of maintaining and caring for injured plaintiffs increased, it came to be perceived that Social Security funds were bearing the brunt of expenses which should be borne by the insurance companies who almost always indemnified the tortfeasor against a liability for which he was responsible. In 1978 the Royal Commission on Civil Liability and Compensation for Personal Injury (Chairman Lord Pearson) recommended that the full value of Social Security benefits paid to an injured person as a result of an injury should be deducted in assessing damages. However it proved difficult to obtain a consensus as to how these recommendations should be implemented. Eventually the Social Security Act 1989 gave effect to the proposals but they have given rise to considerable difficulty and unfairness which have, in part at least, been redressed by the provisions of the Social Security (Recovery of Benefits) Act 1997.

Recoupment was originally provided for in the Social Security Act 1989 and by the Social Security Recoupment Regulations 1990. The stated purpose of the provisions was to ensure that the State should not subsidise tortfeasors and that accident victims should not get a windfall from double payments, once in compensation and once in benefit. Thus the new provisions required full deduction to be made of all prescribed benefits. The deduction was to be from the entire payment of damages, including general damages for pain and suffering and loss of amenity, and not just set against the special damages for loss of earnings. The machinery used was to require the person making the compensation payment (the compensator) to refrain from making any payment of damages until the Secretary of State had furnished a certificate of total benefit. The compensator was then required to deduct from any payment of damages an amount equal to the gross amount of the relevant benefits paid or likely to be paid to or for the victim during the period of five years following the accident. Special provision was made where the compensator was a foreign national, for small payments of damages and other similar circumstances. As the payments were required to be made on the basis of a certificate provided by the Secretary of State, the Act allowed for review of the certificate and appeals against the amount both by the compensator and by the victim.

In the consolidating legislation, the Social Security Administration Act 1992, the recoupment provisions were contained in Part IV under the rubric “Recovery from Compensation Payments”.

Section 81 contained relevant interpretations for that part of the Act.

By Section 82 it was provided:

“(1) A person (“the compensator”) making a compensation payment, whether on behalf of himself or another, in consequence of an accident, injury or disease suffered by any other person (“the victim”) shall not do so until the Secretary of State has furnished him with a certificate of total benefit and shall then -

(a) deduct from the payment an amount, determined in accordance with the certificate of total benefit, equal to the gross amount of any relevant benefits paid or likely to be paid to or for the victim during the relevant period in respect of that accident, injury or disease;

(b) pay to the Secretary of State an amount equal to that which is required to be so deducted; and

(c)furnish the person to whom the compensation payment is or, apart from this section, would have been made (“the intended recipient”) with a certificate of deduction.

(2) Any right of the intended recipient to receive the compensation payment in question shall be regarded as satisfied to the extent of the amount certified in the certificate of deduction.”

Section 83 provided:

“The compensator’s liability to make the relevant payment arises immediately before the making of the compensation payment, and he shall make the relevant payment before the end of the period of 14 days following the day on which the liability arises.”

Section 84, The certificate of total benefit:

“(1) It shall be for the compensator to apply to the Secretary of State for the certificate of total benefit ...

(2) The certificate of total benefit shall specify -

(a) The amount which has been or is likely to be paid on or before a specified date by way of any relevant benefit which is capable of forming part of the total benefit.”

Section 91 made provision for overpaid benefits, Section 97 for a review of certificates of total benefit and Section 98 for appeals:

“... against any certificate of total benefit at the instance of the compensator, the victim or the intended recipient ...”

As has been pointed out, the deduction of an amount equal to the gross amount of relevant benefits paid or likely to be paid to the victim during the relevant period is to be made from a compensation payment which includes any payment falling to be made in consequence of the accident by or on behalf of a person who is

“... liable to any extent in respect of that accident”.

Thus the payment of the equivalent sum comes out of the award for which the compensator is liable , including general damages and special damages such as loss of earnings and other pecuniary loss.

Section 81 further provided:

“(5) Except as provided by any other enactment, in the assessment of damages in respect of an accident, injury or disease the amount of any relevant benefits paid or likely to be paid shall be disregarded.

(6) If, after making the relevant deduction from the compensation payment, there would be no balance remaining for payment to the intended recipient, any reference in this part to the making of the compensation payment shall be construed in accordance with regulations.”

The Regulations referred to were Part 4 of the Social Security Recoupment Regulations 1990, paragraph 14 of which provided:

“Where, after making the relevant deduction from the compensation payment, there is no balance remaining for payment to the intended recipient, any reference in Schedule 4 (of the Social Security Act 1989 now Part 4 of the Social Security Administration Act 1992) to the making of the compensation payment shall be construed as a reference to the acceptance by the intended recipient of an offer in respect of his claim against the compensator.”

This provision appears to have been inserted so that the compensator and the intended recipient could not argue that if after taking account of the deductions no damages were payable, the recoupment provisions did not apply because the compensator was making no compensation payment.

Thus it seems that Parliament contemplated that, but for this provision, the Secretary of State might be unable to recoup any of the benefit payments made during the relevant period.

In rejecting the plaintiff’s claim to recover as pecuniary loss the amount of the benefits he was receiving before the accident, the judge regarded the provisions of Section 81(5) as preventing any such recovery. He said:

“I can see no answer to the argument of Mr. Holdsworth (counsel for the defendant) that such an addition cannot be made by reason of Section 81(5) ... Mr Reade sought to say that the dicta related to the fact and quality of the benefits paid: that may be, but in my judgment it is no answer to the point. I consider that it is plain that the sub-section requires the court to disregard the benefits altogether, and the addition of them (or any part of them) to the damages is as much precluded by the sub-section as the deduction of them. Neither Henry L.J. in his dicta nor Mr Burrell in his article refer to Section 81(5), except obliquely, and neither explains why the sub-section does not apply.”

The judge then referred to the judgment of Pringle J. in the High Court of Northern Ireland in Mitchell v The Department of Environment for Northern Ireland , who also relied on the equivalent provision to Section 81(5) in the Northern Ireland legislation.

In my view this sub-section does not provide the conclusive answer to the plaintiff’s claims the judge suggested. It was, I think, included to make it clear that benefits which prior to the arrangements for recoupment had been deducted from loss of earnings should no longer be regarded as deductible to avoid them being deducted twice. Prior to the passing of the Act benefits such as Family Credit, Attendance Allowance, statutory Sick Pay and Unemployment Benefit had been held by the court to be deductible from loss of earnings as sums which the victim would not have received but for the accident. They were taken into account in full in the assessment of damages. It is noticeable that Section 8(5) refers to the assessment of damages and not to the assessment of the compensation payment. Moreover it is quite clear that it is “in assessing damages in respect of an accident” that the relevant benefits “paid or likely to be paid” are to be disregarded. So the provisions could not refer to benefits paid before the accident. It is also clear that the phrase “any relevant benefits paid or likely to be paid” where they appear in Section 82(1)(a) refer to payments made after the accident and during the relevant period.

I can thus find no support for the judge’s interpretation that the provisions of sec. 81(5) prevent the court from considering recovery of a sum as special damages based upon the benefit which, but for the accident, the plaintiff would have continued to receive.

The mere fact that the plaintiff continued to receive an equivalent sum in benefit to the sums which he was receiving before the accident is no bar to such a recovery. The reality is that the benefit he was receiving before the accident was due to his pre-existing disability or unemployment. After the accident he received the same sum but repayable by the recoupment provisions from any compensation recovered. Suppose the case that the plaintiff, rendered unconscious by the accident and unable to look after himself, had been looked after by a benevolent relative unaware that the plaintiff could claim benefits as a result of the accident. The plaintiff’s existing benefits would be stopped because he did not sign on and until he made a new claim for benefits resulting from the injuries sustained in the accident he would be in receipt of no benefits. I can see no reason in general principle why the plaintiff could not claim the benefits lost. Moreover there are many instances in which a plaintiff receives an equivalent sum to earnings or other benefits of which he was in receipt before the accident on condition that he was morally or legally obliged to repay the sums received as compensation. So, for example, in Liffen v Watson [1940] 1 KB 556 the plaintiff, a domestic servant, before the accident had received from her employer £1 per week wages and board and lodging. After the accident she went to live with her father who provided board and lodging for her. The trial judge refused to award as damages the value of her board and lodging because her father had without cost to her provided board and lodging of equivalent value.

This court held that the trial judge was wrong. Slesser L.J. said:

“... If, since the plaintiff’s discharge from hospital, her father has provided her with board and lodging in his home, that is no reason why she should not be heard to say that her loss of board and lodging previously provided by her employer was as much a loss to her as if she had lost the actual sum in money.”

Goddard L.J. said:

“The plaintiff lost her right to the board and lodging provided by her employer because she was rendered by the accident unfit to work. It does not matter whether after the accident she was taken in by her father or by a friend to whom she might say: “I cannot make a contract with you but I will pay you something if I recover damages”. The only consideration is what the plaintiff lost. She lost the value of the board and lodging just as she lost her wages and she is entitled to be compensated for that loss.”

Similarly in Dennis v London Passenger Transport Board [1948] AER 779, a plaintiff was held entitled to recover wages paid to him by his employer on condition that, if he recovered them, he would repay the employer.

There is therefore no general principle against a plaintiff claiming for loss of the benefits which, but for the accident, he would have received during the period of his disability following the accident.

If the plaintiff obtains judgment for those benefits, it would not result, as was suggested, in the compensator having to pay twice over. In the ordinary case the amount of the benefits awarded to the plaintiff by the judgment will be satisfied by payment of the equivalent amount determined in accordance with the certificate of deduction. See sec. 82(2). The plaintiff will then receive any compensation awarded by way of general damages undepleted by the payment of the equivalent sum to the Secretary of State.

In giving further reasons for his decision, Judge Hague emphasised that recoupment was intended to be from all the damages, both general and special, and should not be “at the expense of the compensator”. The repayment provisions on a successful appeal against a CRU certificate are only explicable on that basis.

In the ensuing paragraph he suggested that Lord Justice Henry had concentrated entirely on unfairness to the victim and ignored unfairness to the compensator, but it would seem from his remarks that the judge was under the impression that the recoupment provisions required the compensator to pay the full amount stated in the certificate of total benefit even though it exceeded the full amount of any compensation payment or award of damages. However I do not think that the recoupment provisions do so provide. Sec. 82 does not require payment of the sums specified in the certificate of total benefit. It requires the compensator to deduct from the compensation payment an amount “determined in accordance with the certificate of total benefit” and equal to the gross amount of the relevant benefit and to pay to the Secretary of State an amount equal to that which is required to be so deducted. Since the compensator cannot “deduct” from the compensation payment more than the amount of the compensation payment, he is not required to pay to the Secretary of State more than the compensation payment; any balance over and above the amount of the compensation payment cannot in my view be said to be “deducted from it”. This seems to me to be further supported by the arrangements for recovery of any amount of the relevant payment made which exceeds the amount that ought to have been paid. For by sec. 99(1) the Secretary of State is required to repay an amount equal to that excess to the intended recipient. Thus although sec. 98 affords the compensator the right of appeal against a certificate of total benefit on the ground for example:

“b) that benefit paid or payable otherwise than in consequence of the accident, injury or disease in question has been brought into account”,

there is no provision for repayment of any sum to the compensator.

This omission seems to have led the judge to express the view that if the plaintiff were to appeal successfully against the certificate and to achieve a repayment as:

“On (his) findings in the previous judgment he might well be able to do”

a repayment to him could result in substantial overcompensation at the expense of the defendant. For reasons already given I cannot agree with this suggestion.

Section 98 gives a right of appeal against the Certificate of Total Benefit on the grounds set out in ss. 1(a) or (b) and whilst it is true that no appeal can be brought until the claim giving rise to the compensation payment has been finally disposed of and the relevant payment has been made, the provisions of sec. 99 for recovery in consequence of an appeal only apply when the amount of the relevant payment actually made exceeds the amount that ought to have been paid. The relevant payment is the payment to the Secretary of State by the compensator which as previously explained will not exceed the total amount of the damages awarded or agreed. There would thus be no question of any repayment being due to the compensator and if, as appears to have been the case, Parliament intended that the recoupment should be made from the compensation payment as a whole, there could be no question of the intended recipient receiving more whether by damages or repayment than the total amount of the damages. But equally if an excessive amount has been deducted from the compensation payment and the plaintiff successfully appeals under sec. 98, I can see no reason why he should not be paid the excess.

For these reasons I consider that the judge ought to have awarded the plaintiff a sum equivalent to the benefits which he would have received but for the accident. As he held that the plaintiff’s disability due to the accident lasted only until 14th January 1991, the amount was £10,869.45 which with his medical expenses and general damages amounted to £15,319.45. This sum represents the limit the defendant as compensator is required to pay to the Secretary of State. It will then be for the plaintiff to appeal against the amount stated in the CRU Certificate. If the Secretary of State does not accept that benefits paid otherwise than in consequence of the accident have been brought into account, he would no doubt refer the question to a medical tribunal who must take into account the court’s decision “relating to the issue”. See sec. 98(6).

Thus the dispute, if there is one, would not concern the compensator who has already discharged in full his liability to the intended recipient and the Secretary of State.

I would thus allow the appeal and enter judgment for the plaintiff for £15,319.45.

LORD JUSTICE SIMON BROWN: I agree.

LORD JUSTICE WALLER: I also agree.

ORDER: Appeal allowed with costs.