Judgments - Wisely v. John Fulton Plumbers Limited (Scotland)
Wadey v. Surrey County Council

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    In one significant respect the provisions about interest in section 103 of the Act of 1992 have been rendered unnecessary by the new scheme. Awards of general damages and of solatium are no longer exposed to the risk of a reduction to reflect the amount paid under the scheme to the Secretary of State by the compensator. There is therefore no need for a provision directing the order in which the reduction is to be made as against special and general damages and as against patrimonial loss and solatium. But section 103 was in two parts. The second part, which contained a special provision about the order of ranking as between general and special damages and patrimonial loss and solatium, is the part which has been superseded under the new scheme. The first part, which contained a general provision about assessing the amount of interest payable in respect of an award of damages, would still have been relevant under the new scheme but it has not been re-enacted. The only guidance which the new scheme contains as to how this matter is to be dealt with is that to be found in section 17, which provides that the amount of any listed benefits is to be disregarded in assessing damages.

Discussion

    The effect of section 17 is that damages must be assessed in a way which treats the amount which the claimant has received by way of listed benefits in exactly the same manner as any amounts which he may have received under, for example, a private insurance policy. They are to be disregarded, so the amounts awarded under the heads described in Schedule 2 to the Act of 1997 as loss of wages, cost of support and loss of mobility are to be assessed without making any deduction for the relevant benefits. The normal practice is for amounts which are treated as irrelevant in the assessment of damages to be disregarded when interest is being awarded on those damages. This is because the purpose of the award of interest is to compensate the claimant for lying out of the money to which he has been found entitled by the court when it is making the award of damages. Amounts which are to be disregarded are treated as irrelevant when the amount of damages is being assessed. It seems unlikely that there can be a sound reason in principle for treating sums received by the claimant from other sources which are irrelevant for the purpose of assessing damages as relevant when interest on those damages is being calculated.

    On the other hand the context in which an award of damages is made for personal injury is one in which everyone now knows that a claimant who has received listed benefits during the relevant period will suffer a corresponding reduction in the compensation awarded by the court when the payment is made to him by the compensator. Section 8(3) of the Act of 1997 provides that the gross compensation attributable to each head of compensation listed in Schedule 4 is to be reduced by deducting the amount of the recoverable benefit shown against that head in the Schedule which the compensator is liable to pay to the Secretary of State for the relevant period. It is clear that the compromise which was adopted in 1948 has now been departed from entirely and that the scheme treats the whole of the listed benefits received during the relevant period as compensatory and deductable. It does not seem to be consistent with principle that the injured party should be awarded interest on sums awarded to him as damages for which he has already been fully compensated by the receipt of these benefits. As Lord Nimmo Smith observed in George v. George C. Peebles & Son, 1998 S.L.T. 685, 688B-D, the purpose of an award of interest on damages for loss of wages is to compensate the claimant for being deprived of the use of money which he would have received but for the accident. It did not appear to him to be appropriate to leave out of account the fact that the pursuer in that case had in fact received benefits in place of the earnings which he would otherwise have received. He did not feel driven by the repeal of section 103 of the Act of 1992 to disregard the receipt of benefits in a manner which he regarded as unacceptable. The inference which he drew from the fact that section 103 had not been replaced by a new provision in the Act of 1997 was that Parliament intended that the discretion conferred on the court by section 1 (1A) of the Interest on Damages (Scotland) Act 1958 should continue to be exercised in the light of the whole circumstances of the case including the new scheme for the recovery of benefits.

    In their submissions both Mr. Jones Q.C. for the appellants in Wisely's case and Mr. Stuart-Smith for the appellants in Wadey's case relied on the same general principles. They referred to the discretion which has been given to the courts in both Scotland and England by statute as to the awarding of interest on damages. Mr. Jones submitted that the court was entitled in the exercise of its discretion to take the benefits into account when calculating interest because there was no direction in the Act of 1997 that it must not do so. He said that it was clear from the wording of section 1(1A) of the Act of 1958 and from its long title that "interest" within the meaning of that Act was being treated as an amount which was separate from the "damages" on which it was awarded. He accepted that the practice in Scotland was for the court to include in the sum for which it decerns in respect of damages for personal injuries interest on those damages: Smith v. Middleton, 1972 S.C. 30, 39 per Lord President Emslie. But this was a United Kingdom statute, and the legislation showed that interest and damages had been regarded by Parliament as separate concepts. The same distinction had been recognised by section 103 of the Act of 1992 which referred to interest "in respect of " an award of damages. So the direction in section 17 of the 1997 Act should be read as a direction regarding the assessment of damages only, and not as a restriction on the discretion of the court when it was awarding interest on those damages. Mr. Stuart-Smith referred to the guidance in Jefford v. Gee [1970] 2 Q.B. 130 on the awarding of interest in personal injury cases and to the provisions of section 69 of the County Courts Act 1984. The guiding principle was that a claimant should not be compensated by an award of interest for losing money when he has not suffered loss by being kept out of that money. The discretion available to the court under section 69 of the Act of 1984 enabled effect to be given to that principle. The court was entitled to adopt a Janus-like approach to this matter. It was entitled to look beyond the amount of its award when assessing interest, as it knew that the sum which the claimant would receive from the compensator would be the net sum after deduction of the benefits.

    At first sight there is much to be said for the appellants' arguments, and I confess that I have not found it easy to decide what Parliament intended when it repealed section 103 of the Act of 1992 and did not re-enact an equivalent provision about interest as part of the new scheme. But there are a number of factors which must be weighed in the balance alongside the arguments based on principle on which the appellants rely.

    The first is the plain fact that it would have been open to Parliament to have enacted such a provision but that it has not done so. I see no reason to regard this as an oversight. Although it was no longer relevant to set out an order of ranking as awards of general damages and of solatium, it would still have been relevant if this was thought appropriate to direct that in assessing the amount of interest payable the amount of the award of damages should be treated as reduced by a sum equal to the amount of the recoverable benefits. In the absence of a provision to that effect, I would be inclined to read the direction in section 17 of the Act of 1997 that benefits are to be disregarded in assessing damages as extending also to the calculation of interest on those damages. I would apply the principle which I suggested earlier that sums which are treated as irrelevant in assessing damages should not be treated as relevant when interest on the damages is being calculated.

    The structure of the scheme supports this approach. The Act makes it clear that the system for returning the amount of the benefits received during the relevant period to the taxpayer is entirely separate from the court process. As the Lord President pointed out in Wisely's case at p. 914H-I, the deduction of benefits is to be made under section 8 of the Act at the time when the compensator is discharging his liability to the claimant for the amount of the compensation payment, while the court deals with interest at the earlier stage when it is determining the amount of that liability. The system which sections 10 and 11 provide for the review of and appeal against a certificate of recoverable benefit, which determines the amount to be paid to the Secretary of State by the compensator and the amount of the deduction which he makes when discharging his liability to the claimant, is also designed to operate only at the later stage after the court has determined the amount of that liability. The appeal system enables both the person who applied for the certificate and the claimant to appeal against it on grounds which would be relevant to the calculation of interest if the amount to be deducted from the compensation was to be taken into account at that stage. But section 11(3) provides that no appeal may be made under that section until the claim giving rise to the compensation payment has been finally disposed of and the liability of the compensator to pay the Secretary of State under section 6 has been discharged.

    Section 14 provides that where, following an appeal, a fresh certificate of recoverable benefits is issued and that in consequence of the review or appeal it appears that the total amount paid is more than the amount that ought to have been paid regulations may provide for the Secretary of State to pay the difference to the person who made the payment, or to the person to whom the compensation payment is made, or partly to one and partly to the other. But no mention is made in this section, or in regulation 11 of the Social Security (Recovery of Benefits) Regulations 1997 (S.I. 1997 No. 2205) which provides that where the total amount paid was more than the amount that ought to have been paid the amount of the compensation payment made under section 8 of the Act is to be recalculated, of the recalculation of interest to take account of the fact that the amount of the recoverable benefits was overstated in the original certificate. Nor is there any provision for the recalculation of interest if a fresh certificate is issued which requires an additional amount to be paid to the Secretary of State by the compensator. This suggests that it was appreciated that complications would arise if interest on the damages had to be recalculated after the court had made its award of damages, and that these were best avoided by omitting any provision directing the court to disregard the amount of the benefits when assessing the amount of interest on the damages. As the Lord President said in Wisely's case at p. 916E-F, the Act of 1997 is essentially a practical compromise. The purpose of the scheme is to enable the taxpayer to recover the benefits in a manner which is as simple and practicable as possible.

    There are a number of other points to which I would be inclined to attach less importance. At first sight it might be thought that the fact that, according to the ordinary rules applying to judgment debts, interest is payable on the full amount of the compensation payment awarded by the court between the date of its award and payment of the reduced amount by the compensator supports the view that interest should be paid on the full amount for periods prior to the date of the award. This is a consequence of the direction in section 17 that the benefits are to be disregarded in assessing damages. But the position was the same under the previous scheme as to the period after the date of judgment. The direction in section 103 applied only to the assessment of interest in respect of the award of damages for periods prior to the date of the award, not to interest due on the full amount for the period after the award was made and the previously illiquid claim for damages had been converted into a liquid debt. Similarly I do not think that it would be wise to make assumptions either one way or the other about the nature of the task which the court would face if it were to be required to disregard the benefits when assessing interest on the damages. The fact that judges sitting at first instance in both England and Scotland were able to obtain the necessary information and to make the calculation without any apparent difficulty suggests that nothing is to be made of this point on policy grounds. Nor is there any hint in the opinions of the judges in the Inner House of the Court of Session or the judgments of the Court of Appeal that the decisions which they took were reached on grounds of practice or policy. It was recognised in both courts that the issue is essentially one of statutory interpretation, as to which the best guide is the nature and effect of the scheme laid down by the statute.

    There was some discussion both in the Inner House of the Court of Session and in the Court of Appeal as to whether, even though section 103 of the Act of 1992 had been repealed, it would be open to the court to take the benefits into account under the statutory powers which enable the courts in both Scotland and England to award interest on damages. The Lord President in Wisely's case at p. 915F-G, said that the argument that there were "reasons special to the case" within the meaning of section 1 (1A) of the Interest on Damages (Scotland) Act 1958 not to award interest in respect of this element of wage loss was recognised by the appellants' counsel to be implausible as it would apply in so many cases, and Mr. Jones did not press this argument before your Lordships. He maintained that the general discretion available to the court under that section enabled the court to look beyond section 17 of the Act of 1997 and take account of the fact that the listed benefits were to be deducted from the sum paid in settlement of the award of damages. Simon Brown L.J. in Wadey's case at p. 1622D-E said that he saw some force in the argument that there were "special reasons" within the meaning of section 69 of the County Court Act 1984 but that there were powerful arguments to the contrary. Mr. Stuart-Smith accepted that the argument that there were special reasons was a tenuous one, and he relied mainly on what he described as the second level of discretion which he said was inherent in the words "all or part of the debt or damages in respect of which judgment is given." But these differences in language between the Scottish and English statutes do not seem to me to be significant for present purposes, as I would hold that the point on both sides of the Border must receive the same answer. The effect of section 17 of the Act of 1997, in the context of the scheme which the Act lays down, is that the amount of any listed benefits paid or likely to be paid during the relevant period must be disregarded in the assessment of interest on the damages which are to be assessed without taking account of those benefits.

Conclusion

    There seemed to me at one stage to be much to be said for resolving the question which has been raised in these cases by a robust application of the principle that a claimant is to be awarded interest only for being kept out of his money to the known fact that, if he has been compensated for his loss during the relevant period by the receipt of listed benefits, the damages awarded to him will be reduced by the deduction of those benefits. But the history of this legislation shows that it has not been possible to solve all problems in a way which is consistent with this principle, and the scheme which Parliament has laid down in the Act of 1997 for the return of those benefits to the taxpayer does not seem to me to permit this approach. I would dismiss the appeals.

LORD CLYDE

My Lords,

    These two appeals from the First Division of the Court of Session in Scotland and from the Court of Appeal in England raise a problem about the allowance of interest in relation to an award of damages for personal injury. Much of the relevant legislation is common to both countries and even where there are separate statutory provisions the language is not significantly different. It is agreed by all parties that the same solution to the problem should apply on both sides of the Border. I deal more specifically with the Scottish case, because it was the earlier of the two decisions and indeed clearly influenced the judges of the Court of Appeal in England who followed and agreed with it. The issue concerns the interest to be awarded on that part of an award which relates to patrimonial loss, or special damages, as distinct from solatium, or general damages, in a case where the injured person has received certain state benefits in consequence of the injury for which he is claiming damages.

    The general purpose of an award of interest at common law is recognised both in Scotland and England as being to compensate the creditor for the loss of enjoyment of the sum to which he was entitled. The position at common law in Scotland was expressed by Lord Westbury in Carmichael v. Caledonian Railway Co. (1870) 8 M.(H.L.) 119, 131 in these words:

    "Interest can be demanded only in virtue of a contract, express or implied, or by virtue of the principal sum of money having been wrongfully withheld, and not paid on the day when it ought to have been paid."

But in the particular context of awards of damages for personal injury Parliament has intervened in order to enable an award of interest to run from a date prior to the quantification of the sum of damages. The relevant enactment for Scotland is section 1 of the Interest on Damages (Scotland) Act 1958, as amended by the Interest on Damages (Scotland) Act 1971, and the relevant provisions for England are in section 35A of the Supreme Court Act 1981, as amended by section 15(1) and Part I of Schedule 1 to the Administration of Justice Act 1982, and in section 69 of the County Courts Act 1984.

    In general sums which an injured person has received consequent upon his injury should be taken into account in assessing the total of his patrimonial loss. Otherwise he would be overcompensated and the purpose and object of an award of damages would not be achieved. But there are various exceptions to that general rule, as was recognised in Hodgson v. Trapp [1989] 1 A.C. 807. The receipt of state benefits by the injured person is obviously a relevant matter to be considered in this connection, but here Parliament has sought to solve the problem by making specific provision in that regard. Under section 2(1) of the Law Reform (Personal Injuries) Act 1948, which applied both to Scotland and to England, it was provided that in the assessing of damages for loss of earnings or profits there was to be taken into account one half of the value of certain specified benefits which had or probably would accrue to the injured person for a period of five years from the date of the cause of action. That system operated until it was replaced, except in cases of certain small compensation payments where it continued to apply, by a new scheme introduced by the Social Security Act 1989, as amended by the Social Security Act 1990. The present version of this is now to be found in the Social Security (Recovery of Benefits) Act 1997, which finally repealed section 2(1) of the Act of 1948. It is with the construction and application of the Act of 1997 that the present appeals are concerned.

    The new regime was significantly different from the former scheme. Essentially while under the former scheme the wrongdoer or tortfeasor was relieved from paying the whole of the patrimonial loss, since one half of the benefits was to be set against the sum in the award, under the new scheme the Secretary of State is able to recover from the person paying the damages, referred to as the "compensator," a sum representing the benefits paid to the injured person and the compensator is then entitled to offset that sum against the amount which he is bound to pay to the injured person under the court's order and is to that extent discharged from satisfying the order. Under the language of the Act a payment made to a person in consequence of an accident, injury or disease is a "compensation payment." By virtue of section 1(3) of the Act of 1997 voluntary payments as well as payments under a court order are included. For this purpose of the scheme the Act sets out in Schedule 2 various heads of loss which may be found within a compensation payment and a list of the particular benefits to which each head is to relate. Any of the benefits in the list which have been or are likely to be paid in respect of the accident, injury or disease, during a period defined in detail in section 3 and referred to as the "relevant period," constitutes a "recoverable benefit." In paying the person entitled to a compensation payment the compensator is entitled to offset against the heads of loss specified in Schedule 2 the recoverable benefits relative to each of those respective heads. The appellants claim that in awarding interest in an award for damages in respect of any past patrimonial loss the court should deduct the whole of the amount of the recoverable benefits and award interest only upon the net balance. The respondents claim that interest should be awarded on the whole amount of the past patrimonial loss, without any deduction in respect of the recoverable benefits.

    The problems to which the interplay between the receipt of state benefits and the awarding of interest have given rise are not always readily reconcilable with principle. On the former system interest would be awarded on the net sum of the past pecuniary loss, that is to say, after deduction of one half of the benefits. The injured person thus received interest not only on the sum which he had actually been out of pocket, but also, to the extent of the amount of the other one half of the value of the benefits, on an amount which he had actually received by way of benefit. Furthermore the calculation of the benefits could be related to a period of five years and if the award by the court was made before the expiry of that period interest was being charged in respect of sums which the injured person had not yet received. In effect the sum awarded was taken to be the sum of the pursuer's pecuniary loss and interest was applied to that sum as if it was the amount of his loss, and as if it was the sum which, to use the common law formula, had been wrongfully withheld. Under the new scheme it is accepted that some interest is to be paid in respect of the past elements in the court's award, but no interest is provided for under the statutory scheme to be paid by the wrongdoer in respect of a delay in payment to the Secretary of State. The question then arises whether the intention was that this absence of obligation to pay interest to the Secretary of State should enure to the benefit of the wrongdoer, which might be thought unlikely, or, as would seem more probable, to the benefit of the injured person. The former would be achieved by the wrongdoer not being obliged to pay any interest in respect of the recoverable benefits and enjoying the use of the money until he paid it to the Secretary of State. The latter would be achieved by an obligation on the wrongdoer to pay interest to the injured person on the amount of the recoverable benefit. That points to a solution favourable to the respondents.

    What seems to me very evident from the new scheme is that a separation is being made between the court's function in the assessing and awarding of damages and the quite distinct mechanism for the recovery of the recoverable benefits from the wrongdoer. The latter process is managed independently of the court. It operates after the court has made its order. It concerns particularly the time of payment to the pursuer, not the time of the making of any order or decree by the court. It affects not the terms of the order but the satisfaction of the order by the compensator. It has its own procedures for the resolution of disputes, which may involve reference to a medical appeal tribunal. Under section 14 of the Act and regulation 11 of the Social Security (Recovery of Benefits) Regulations 1997 (S.I. 1997 No. 2205) if it is found that the amount of the recoverable benefit has been over calculated and too much has been paid to the Secretary of State, then the balance is to be repaid by the Secretary of State to the compensator, the compensation payment is recalculated and the increase if any is paid to the person to whom the compensation payment was made. Nothing in that process touches upon the award made by the court. It is managed outwith the court processes. Significantly no provision is made for the recalculation of any interest upon the court's award, although if the appellants were correct and the calculation of interest proceeded only upon a net figure of patrimonial loss the injured party would have been deprived of some element of interest which should if, the calculation had been correct in the first place, have been paid to him. But it is only to the amount of the compensation payment that the adjustment is made, and not to the order of the court. The distinction drawn in the Act between the function of the court in the making of an award and the function of the compensator in the adjustment of the amount to be paid under the award in light of the amount of the recoverable benefits supports the respondents' solution.

    It seems to me that the answer to the problem raised in these appeals lies essentially in section 17 of the Act of 1997. Its terms seem to me plain and unambiguous. It formerly appeared as section 22(6) of the Social Security Act 1989, then as section 81(5) of the Social Security Administration Act 1992. In its final form in the Act of 1997 it states: "In assessing damages in respect of any accident, injury or disease, the amount of any listed benefits paid or likely to be paid is to be disregarded." The listed benefits are the benefits listed in Schedule 2. The appellants did not suggest any convincing reason why this particular provision had been made. It seems to me that it is part of the overall scheme whereby the intention is that the court should have no concern with any adjustments which may be appropriate to take account of any benefits which the injured person may have received. Only in two other particular respects does the Act touch upon the function of the court. In section 15 the court is required to specify in its order the amount of any compensation payment which is attributable to any of the heads of compensation listed in Schedule 2. By section 16 provision is made for regulations and rules of court in England relating to cases where a payment into court is made. In the absence of any provision requiring any modification of the award for the purposes of an award of interest it seems to me that section 17 requires the court to take the gross amount of the patrimonial loss as representing the sum of that loss. In such a case the ordinary course would be to award interest on the whole of that sum. That is what I consider is the effect of section 17. There may of course be some other receipts which will require to be deducted, but none of the listed benefits will be among them.

 
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