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

(back to preceding text)

    Counsel for the appellants were at pains to stress that throughout the legislation a distinction is preserved between damages and interest. That may well be so. But that consideration does not to my mind solve the problem. I do not find it necessary to treat the matter as one of construction of the word "damages." The effect of the section is that in respect of the patrimonial loss the court is to assess the damages as if no benefits had been received. Thus putting aside any deduction in respect of receipts which might otherwise have to be made, and assuming for the sake of simplicity that the only patrimonial claim is for loss of earnings, the damages for the past loss are to be assessed as the total amount of the earnings which the injured person would have received had the accident not occurred. That the injured person may not have actually been out of pocket to that extent is to be disregarded. It is, as it were, to be assumed that he has received no benefits. But if that is the assumption on which the award of damages for past patrimonial loss is assessed, then when it comes to considering interest it should follow that it is on that sum of past loss of earnings that the interest should be calculated. That seems to me to be the necessary consequence of the disregarding of the benefits by the court in the assessing of damages which is required by the section. The gross loss of earnings will be taken to be the actual amount of the loss so far as the court is concerned, just as under the former scheme the loss was taken to be the gross loss less one half of the benefits. Just as under the former scheme interest was awarded on what was a somewhat artificial figure, so now it is awarded on a sum which in effect is to be taken by the court to be the relevant loss. The sum of the loss of earnings is to be taken as the sum which, as it were, has been wrongfully withheld. The same should hold true of any other losses listed in Schedule 2 which the pursuer may claim. Certainly there is nothing in the Act of 1997 to suggest that any other approach to an award of interest is to be adopted and the view which I reach is based principally upon the effect of section 17.

    It would be desirable to preserve the theory on which interest is awarded subject to any assumptions which the legislation requires, and on the assumption which, as it seems to me, section 17 requires to be made, the respondents' solution is compatible with the theory. The appellants sought to found upon the common law principle as providing the guidance to the correct solution, but even on their approach an inconsistency arises. It is not disputed that interest on the whole award will run from the date of the court's order so that interest will run from the date of the order until payment on an amount which includes the sum of the recoverable benefits. It seems to me the less easy to stand on principle and insist on the absence of an allowance of interest on that same amount for the period before the order. Indeed that the victim is entitled to interest after the award seems to me to fit most neatly with a scheme whereby it is the victim and neither the wrongdoer nor the Secretary of State who is entitled to interest prior to the award.

    While I accept that each of the alternative solutions put forward by the opposing parties to these appeals may be workable, I am impressed by the clean and simple approach which has been favoured by the courts below. It frees the court from the necessity of having and giving effect to a certificate of recoverable benefit, overcomes any problem which might arise about the difficulty of getting a certificate which is final and complete, and avoids any complication which might follow from a challenge to that certificate. Apart from the minor matters which I have mentioned in sections 15 and 16 the court can proceed without concern for the receipt of any of the listed benefits in the past or the future. The adjustment of the rights of the parties in relation to the sum payable under the award consequent upon the receipt of benefits is matter for other procedure outwith the court. The risk of a double recovery by the pursuer is met, not through the court process, but at the later stage of the making of the compensation payment. The First Division and the Court of Appeal have both preferred this solution, and in a matter which so closely involves the practice of the courts I consider that if the question was otherwise finely balanced I would be inclined to respect the view which they have adopted.

    The other section which has given rise to difficulty is section 103 of the Social Security Administration Act 1992, which formerly appeared in paragraph 6 of Schedule 1 of the Social Security Act 1990 as an amendment to Schedule 4 of the Social Security Act 1989. More precisely the difficulty is due to the disappearance of that section in the Act of 1997. The short title to that Act indicates that it was to re-state with amendments Part IV of the Act of 1992. The first part of the section provided for the reduction of the amount of the award by a sum equal to the amount of the relevant payment for the purposes of assessing the amount of interest payable. The latter part of the section provided for the reduction to be made first against the damages for patrimonial loss and thereafter against the damages for solatium. That latter provision became unnecessary under the Act of 1997 because of the provisions in section 8 and Schedule 2 to which I have already referred under which particular benefits are appropriated to certain heads of loss for the purpose of calculating the net amount of the compensation payment. It is argued that the earlier part of the section is merely setting the context for the latter part. But both in form and in language the first part can be seen to be of substantial importance in itself.. In its form it is clearly divided into the two parts, joined by the word "and." That by itself points to the twofold purpose which it serves. Beyond that the language of the first part goes far beyond a mere setting of the context for what follows. It contains the express direction "the amount of the award shall be treated as reduced by a sum equal to the amount of the relevant payment . . ." That indicates that but for that provision the amount of the award would not have been reduced, and that interest would have been payable upon the gross sum. The first part is stating what is in effect a substantial precondition for the operation of the second part. The express provision regarding interest contained in para. 24 of Schedule 4 to the Act of 1989 thus cuts across what would in my view have been the ordinary consequence of section 22(6) of the Act of 1989, which is now section 17 of the Act of 1997. The disappearance in the Act of 1997 of the former express provision regarding interest enables section 17 to have the natural effect which I have earlier suggested it should have.

    I consider that the Court of Session and the Court of Appeal each reached a correct view and I would dismiss both appeals.

LORD MILLETT

My Lords,

    I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hope of Craighead and Lord Clyde. As Lord Hope has demonstrated, the present question cannot be resolved by a meticulous examination of the provisions of the Social Security (Recovery of Benefits) Act 1997 ("the Act of 1997") and their legislative history. This merely yields two rival interpretations, each of which is internally self-consistent, and which are both equally compelling and equally capable of being derived from the statutory language. The solution must lie in ascertaining the underlying rationale of the legislation.

    My initial thought was that the answer was to be found in the purpose served by section 17 of the Act of 1997 and its statutory predecessors in the Acts of 1989 and 1992. These require the court to disregard the amount of any listed social security benefits paid or likely to have been paid when assessing damages for personal injury. Prior to the Act of 1989 section 2 of the Law Reform (Personal Injuries) Act 1948 had directed that only one half of such benefits should be disregarded. The other half was taken into account in reducing the amount of the damages which was recoverable by the plaintiff. This represented a compromise, illogical on any footing, between the views of the majority and the minority members of the Monckton Committee in 1946. The majority recommended that the amount of the benefits should be taken into account in assessing damages in order to avoid what they saw as double recovery. The minority considered that benefits were paid for by the plaintiff through his taxes and accordingly should be treated in the same way as private insurance recoveries and left out of account.

    The subject was revisited by the Pearson Commission in 1978. It adopted the view of the majority of the Monckton Committee and recommended that the full amount of any benefits received by the plaintiff should be taken into account in the assessment of damages. This was accepted in principle by the Government in 1981. In a series of judicial decisions it was held that benefits not covered by the Act of 1948 must be taken into account in the assessment of damages. This was an application of the rule, which Lord Bridge of Harwich described in Hodgson v. Trapp [1989] A.C. 807, 819 as "fundamental and axiomatic," that damages for negligence are intended to be purely compensatory. If in consequence of the injuries sustained the plaintiff has enjoyed receipts to which he would not otherwise have been entitled, prima facie those receipts are to be set off against his losses.

    By the time of the Act of 1989 the equation of social security benefits paid for out of general taxation with the receipt either of benevolence or of private insurance paid for by the plaintiff was discredited. Given the contemporary climate of opinion Parliament might have been expected to require the whole of the listed benefits which the plaintiff had received to be taken into account in the assessment of damages. Instead the Act of 1989 provided that they were to be disregarded.

    What appears at first sight to be a paradox is, however, easily explained. The plaintiff does not receive the whole of the damages awarded to him. Although the benefits are disregarded in assessing the damages, that part of the judgment which represents them is payable to the Secretary of State and not to the plaintiff. The plaintiff receives only the balance or net sum which on the traditional view represents the true amount of his loss. On this view the historic link between the amount of the judgment recovered by the plaintiff and the amount of his loss is severed. The plaintiff is awarded a larger sum than he has truly lost so that the arrangements for reimbursing the Secretary of State out of the damages awarded to him do not leave him undercompensated. On this analysis, interest to judgment should be awarded on the reduced sum which represents the true amount of his loss and not on the artificially inflated figure of the judgment.

    This view of the matter appeared to be supported by two considerations. First, the statutory disregard was originally enacted, not in a separate section as a free-standing provision in its own right, but tucked away in an obscure sub-paragraph as a subordinate element of the legislative scheme. This seemed to indicate that it did not represent a policy decision, which would have been remarkable for its contradiction of contemporary thinking, but merely a mathematical exercise. The judgment was to be grossed up so that it could be netted down later. Secondly, the provision introduced by amendment in paragraph 6 of Schedule 4 to the Act of 1989, later section 103 of the Act of 1992, expressly directed that the disregarded benefits should be taken into account to reduce the sum on which interest should be awarded. True, section 103 was not re-enacted in the Act of 1997, but this could be explained on the basis that the second part of the section was no longer necessary in the changed circumstances, while the first part had always been implicit in the statutory scheme and did not need to be expressly re-enacted.

    This was the position at which I had arrived at the conclusion of argument. But there was room for doubt. Although interest to the date of judgment was awarded on the net amount after giving credit for the benefits, judgment was given for the gross amount and it was this amount which represented the judgment debt and carried interest from the date of judgment. I could find no rational basis for allowing interest on a greater sum after judgment than before it. Something must have gone wrong, and given the later history of the legislation in regard to interest, it seemed more logical to suppose that it was in the original enactment of section 103 or its predecessor rather than in the failure to re-enact it. Moreover, an analysis which did not abandon the traditional approach to damages should be preferred to one which did. Could one be found?

    Further reflection has persuaded me that it can. I was asking the wrong question. The proper question is not: why did Parliament enact section 17 or its predecessors? That does not take the inquiry far enough. It is necessary to ask: why did Parliament enact the scheme which made section 17 necessary? Why, in other words, did Parliament require the benefits to be disregarded in the assessment of damages only to bring them into account when it comes to discharging the judgment debt? Why did it not simply direct that the amount of the benefits should be taken into account in reducing the amount for which judgment is given, and make arrangements for the tortfeasor to pay the amount in question to the Secretary of State? This would be in accordance with the traditional approach. The judgment would represent the amount which the plaintiff can recover and both would reflect the amount which the plaintiff has truly lost.

    The answer must lie in the fact that the plaintiff has been made accountable to the Secretary of State for the repayment of the benefits he has received. This is what drives the whole of the statutory scheme. It is what dictates that the amount of the benefits should be deducted from the damages and made payable to the Secretary of State. Once this is appreciated, then the scheme's underlying rationale becomes apparent and everything falls into place. The listed benefits are repayable to the Secretary of State, if not by the plaintiff, then at any rate at his expense. As such they must be treated like any other repayable receipts. If the plaintiff were personally liable to repay them, they would not reduce the amount of his loss and would be disregarded in the assessment of his damages. The fact that they are repayable only out of the damages makes no difference. The statutory scheme treats the listed benefits in the same way as the common law would treat interest-free non-recourse advances to the plaintiff against the ultimate award of damages. The certification process is merely machinery to enable the Secretary of State to be repaid by the tortfeasor out of the damages he would otherwise pay to the plaintiff. It has much the same effect as a garnishee order on a judgment debt in favour of a creditor of the plaintiff.

    On this analysis the statutory scheme does not depart from the traditional approach of the common law. The listed benefits are disregarded in the assessment of damages because they are refundable by or at the expense of the plaintiff and accordingly do not diminish his loss. The damages carry interest before as well as after judgment in the normal way. The link between the amount of the judgment and the amount recoverable under the judgment is not broken since the plaintiff's obligation to apply the damages in repayment of benefit is discharged by the tortfeasor. The plaintiff's apparent double recovery of interest is due to the fact that the Secretary of State is content to be repaid without interest but this is a matter between the Secretary of State who paid the benefits and the plaintiff who received them and enures for the benefit of the plaintiff. It does not affect the amount of the tortfeasor's liability, though it reduces the amount he would otherwise be liable to pay to the Secretary of State and increases the amount which he is liable to pay to the plaintiff. The legislative error lay in the enactment of section 103 and its predecessor and not in the failure to re-enact them in the Act of 1997.

    For these reasons, as well as those contained in the speeches of my noble and learned friends Lord Hope of Craighead and Lord Clyde, I would dismiss these appeals.

 
previous

Lords Parliament Commons Search Contact Us Index

© Parliamentary copyright 2000
Prepared 4 April 2000