CCR/427/2003

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	I allow the claimant’s appeal in part.  I set aside the decision of the Bournemouth appeal tribunal dated 27 August 2002 and I substitute the following decision: the Secretary of State shall issue a fresh certificate of recoverable benefits, specifying as recoverable (a) incapacity benefit paid from 18 May 2000 until the date when the compensator made the compensation payment and (b) disablement pension paid from 16 July 1997 until the same date.

REASONS

2.	I held an oral hearing of this appeal, which is brought under section 13 of the Social Security (Recovery of Benefits) Act 1997.  The appellant claimant appeared in person.  The Secretary of State was represented by Mr M. G. Atkins of the Office of the Solicitor to the Department of Health and the Department for Work and Pensions.  The compensator neither appeared nor was represented.

The facts

3.	The claimant worked for a removal firm in Dorset as a driver.  On 1 April 1997, he suffered a soft tissue injury to his chest when lifting a heavy box.   It appears that he had strained the muscles or ligaments or both in his anterior chest wall.  After an initial period of two weeks off sick following the accident, he returned to work with the same employers, but, after a further period off work, he was advised to leave them, which he did on 30 September 1997.  The problem was that he could not cope with heavy lifting.  He then claimed jobseeker’s allowance and looked for driving jobs that did not involve heavy lifting.  However, drivers are often expected to do a certain amount of loading and unloading of vehicles and two jobs he tried lasted only three or four days because he found them unsuitable.  He also did two trips to Germany and one to Majorca for his old employers on the understanding that he was not required to carry anything heavy.  In October 1998 he received two job offers.  One was for another job in Dorset, which the claimant accepted but, again, turned out to involve heavy lifting so that he left after a week.  The other was for a transport firm in Peterborough and he eventually started work there.  Unfortunately, in early 1999, he suffered an accident at work, which resulted in a traumatic gluteal bursitis, producing severe pain in his left buttock and hip.  He has not worked since then.

4.	As a result of the accident on 1 April 1997, the claimant was awarded disablement benefit from 16 July 1997 under a series of assessments of disablement, the last of which was for life.

5.	Following the accident in 1999, he was at first in receipt of statutory sick pay but he claimed incapacity benefit from 20 August 1999.  Medical certificates dated 4 August 1999 and 1 September 1999 referred to the buttock and hip pain and so did the claimant’s initial claim form, dated 26 August 1999.  Nevertheless, the chest injury was still causing problems, which persisted after the effects of the later injury had cleared up.  An “all work test” assessment on 18 October 1999 resulted in the claimant scoring seven points in respect of sitting, three points in respect of bending and kneeling and eight points in respect of lifting and carrying.  On 13 December 2000, he scored only three points in respect of sitting, but fifteen points in respect of reaching and eight points in respect of hearing.

6.	The claimant brought a claim for damages against the removal firm who had employed him at the time of the accident on 1 April 1997, claiming that his injury was due to their failure to provide a safe system of work and that, as a result of the injury, he was permanently unfit for work.  The claim was resisted by his employers, both as to liability and as to quantum, the employers contending that they were not at fault and that the effects of the injury had in any event passed within a matter of months.  The case was tried in Weymouth county court before Miss Recorder Ralphs, who heard evidence and argument over two days and then gave a reserved judgement on 23 March 2001.  A draft of the judgement appears in the papers before me.  She found for the claimant on liability, but assessed contributory negligence at 25%.  She assessed general damages at £7,500 and assessed special damages on the basis that the claimant had been more or less incapable of any work for two years and had thereafter had a reduced capacity for work.  The loss of earnings for the two years of complete incapacity was assessed at approximately £10,000 per annum and the subsequent reduction in earnings at £1,000 per annum.  Although the latter item covered the two years prior to the judgement as well as future loss of earnings, the learned recorder dealt with it all as though it were future loss of earnings and applied a multiplier of 5.5.  There were various other minor heads of special damage.  A letter from the claimant dated 21 November 2001 shows that at least one adjustment (to take account of earnings received from the Peterborough employer) was made when judgement was given and before the order was drawn up.  In any event, after deduction of the 25% contribution, the total amount of the award was £25,030.25.  The claimant’s counsel wrote an advice, saying that the learned recorder had made a number of errors but advising against an appeal on the basis that, although the claimant had grounds for appeal, the employer did too, particularly as regards liability, and that the claimant should not risk losing what he had gained.  In the event neither party appealed.

7.	The employers had obtained a certificate of recoverable benefits from the Secretary of State.  The certificate listed all the disablement pension and incapacity benefit paid to the claimant since the relevant accident on 1 April 1997.  The employers, as the compensator, deducted the whole amount of benefits listed in the certificate from the compensation paid to the claimant.  A letter to the claimant from his solicitors, dated 27 September 2001, shows the sum of £10,593.32 as having been deducted from the payment of compensation on account of benefit due to the Secretary of State.  It appears that there was at least one review of the certificate and the amount that the Secretary of State claims has been properly recovered from the compensator in the proceedings before me is only £9,434.12.  I presume there has been some adjustment and that the claimant has received from the compensator the difference between the two figures.  He certainly should have done so (see regulation 11(5) of the Social Security (Recovery of Benefits) Regulations 1997).

8.	The claimant appealed against the certificate, complaining that it was wrong for four years’ worth of benefits to be deducted from the compensation due to him when the compensation had been assessed on the basis that he was incapable of work for only two years.  Indeed, the incapacity benefit listed in the certificate was all paid after the end of the period of two years in respect of which full compensation was paid.  However, the tribunal considered that the question for them was simply whether the benefits were paid in consequence of the accident on 1 April 1997 and that the claimant’s argument was inconsistent with him “claiming injury-related benefits long beyond that period”.  They took into account the decision of Miss Recorder Ralphs but concluded that, to the extent that their decision was inconsistent with hers, hers was wrong.  They pointed out that the evidence before her was not the same as the evidence before them.  Accordingly, they dismissed the claimant’s appeal.  The claimant now appeals against the tribunal’s decision with my leave.

The legislation

9.	Before I turn to the grounds of appeal, it is necessary first to set out at some length the material provisions of the 1997 Act.

“1. (1)	This Act applies in cases where –

(a)	a person makes a payment (whether on his own behalf or not) to or in respect of any other person in consequence of any accident, injury or disease suffered by the other, and
(b)	any listed benefits have been, or are likely to be, paid to or for the other during the relevant period in respect of the accident, injury or disease.

   	     (2)	The reference above to a payment in consequence of any accident, injury or disease is to a payment made –

(a)	by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of the accident, injury or disease, or
(b)	…

     (3)	Subsection (1)(a) applies to a payment made –

(a)	voluntarily, or in pursuance of a court order or an agreement, or otherwise, and
(b)	in the United Kingdom or elsewhere.

     (4)	In a case where this Act applies –

(a)	the “injured person” is the person who suffered the accident, injury or disease,
(b)	the “compensation payment” is the payment within subsection (1)(a), and
(c)	“recoverable benefit” is listed benefit which has been or is likely to be paid as mentioned in subsection (1)(b).

…

3.  (1)	In relation to a person  (“the claimant”) who has suffered any accident, injury or disease, “the relevant period” has the meaning given by the following subsections.

     (2)	Subject to subsection (4), if it is a case of accident or injury, the relevant period is the period of five years immediately following the day on which the accident or injury occurred.

	…

     (4)	If at any time before the end of the period referred to in subsection (2) or (3) –

(a)	a person makes a compensation payment in final discharge of any claim made by or in respect of the claimant and arising out of the accident, injury or disease, or
(b)	an agreement is made under which an earlier compensation payment is treated as having been made in final discharge of any such claim,

the relevant period ends at that time.

4.  (1)	Before a person (“the compensator”) makes a compensation payment he must apply to the Secretary of State for a certificate of recoverable benefits.

…

5.  (1)	A certificate of recoverable benefits must specify, for each recoverable benefit –

(a)	the amount which has been or is likely to be paid on or before a specified date, and
(b)	if the benefit is [aid or likely to be paid after the specified date, the rate and period for which, and the intervals at which, it is or is likely to be paid.

…

6.  (1)	A person who makes a compensation payment in any case is liable to pay to the Secretary of State an amount equal to the total amount of the recoverable benefits.

     (2)	The liability referred to in subsection (1) arises immediately before the compensation payment or, if there is more than one, the first of them is made.

…

8.  (1)	This section applies in a case where, in relation to any head of compensation listed in column 1 of Schedule 2 –

(a)	any of the compensation payment is attributable to that head, and
(b)	any recoverable benefit is shown against that head in column 2 of the Schedule.

     (2)	In such a case, any claim of a person to receive the compensation payment is to be treated for all purposes as discharged if –

(a)	he is paid the amount, (if any) of the compensation payment calculated in accordance with this section, and
(b)	if the amount of the compensation payment so calculated is nil, he is given a statement saying so by the person who (apart from this section) would have paid the gross amount of the compensation payment.

     (3)	For each head of compensation listed in column 1 of the Schedule for which paragraphs (a) and (b) of subsection (1) are met, so much of the gross amount of the compensation payment as is attributable to that head is to be reduced (to nil, if necessary) by deducting the amount of the recoverable benefit or, as the case may be, the aggregate amount of the recoverable benefits shown against it.

     (4)	Subsection (3) is to have effect as if a requirement to reduce a payment in deducting an amount which exceeds that payment were a requirement to reduce that payment to nil.

     (5)	The amount of the compensation payment calculated in accordance with this section is –

(a)	the gross amount of the compensation payment, less
(b)	the sum of the reductions made under subsection (3),

(and, accordingly, the amount may be nil).

9.	…

     (4)	For the purposes of this Act –

(a)	the gross amount of the compensation payment is the amount of the compensation payment apart from section 8, and
(b)	the amount of any recoverable benefit is the amount determined in accordance with the certificate of recoverable benefits.

…

10. (1) Any certificate of recoverable benefits may be reviewed by the Secretary of State …

11. (1)	An appeal against a certificate of recoverable benefits may be made on the ground –

(a)	that any amount, rate or period specified in the certificate is incorrect, or
(b)	that listed benefits which have, or are likely to be, paid otherwise than in respect of the accident, injury or disease in question have been brought into account, or
(c)	that listed benefits which have not been, and are not likely to be, paid to the injured person during the relevant period have been brought into account, or
(d)	that the payment on the basis on which the certificate was issued is not a payment within section 1(1)(a).

     (2)	An appeal under this section may be made by –

(a)	the person who applied for the certificate of recoverable benefits; or
(aa)	… or
(b)	(in a case where the amount of the compensation has been calculated under section 8) the injured person or other person to whom the payment is made.

    (3)	No appeal can be made under this subsection until –

(a)	the claim giving rise to the compensation payment has been finally disposed of, and
(b)	the liability under section 6 has been discharged.

12.(1) The Secretary of State must refer an appeal under sectrion 11 to an appeal tribunal.

     (2)	[repealed]

     (3)	In determining any appeal under section 11, the tribunal must take into account any decision of a court relating to the same, or any similar, issue arising in connection with the accident, injury or disease in question.

…

13. (1)	An appeal may be made to a Commissioner against any decision of an appeal tribunal under section 12 on the ground that the decision was erroneous in point of law.

…

15. (1)	This section applies where a court makes an order for a compensation payment to be made in any case, unless the order is made with the consent of the injured person and the person by whom the payment is to be made.

     (2)	The court must, in the case of each head of compensation listed in column 1 of Schedule 2 to which any of the compensation payment is attributable, specify in the order the amount of the compensation payment which is attributable to that head.

…

17.  	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.”

In Schedule 2, column 1 specifies three heads of compensation,  “Compensation for earnings lost during the relevant period”, “Compensation for cost of care incurred during the relevant period” and “Compensation for loss of mobility during the relevant period”.  Disablement pension and incapacity benefit are listed in column 2 against the first of those heads.

10.	Section 14 of the Act provides for the making of regulations providing for payments to be made by or to the Secretary of State following a review under section 10 or an appeal under section 11.  It is necessary to refer here only to regulation 11(1), (4) and (5) of the Social Security (Recovery of Benefits) Regulations 1997, which provides that, where a new certificate is issued and the amount of listed benefits is lower than the old certificate, the Secretary of State must pay the difference to the compensator.  If, under section 8(3), the compensator originally deducted benefits from the amount of compensation, he must make a new calculation under section 8 and pay the amount of any increase in compensation to the claimant. 

The jurisdiction of the tribunal and the tribunal’s error of law

11.	The claimant’s appeal to the tribunal and his appeal to me are in essence challenges to the amount by which the compensator reduced, under section 8(3) of the 1997 Act, the compensation payable to him.  However, the jurisdiction of the tribunal was confined to the grounds upon which a claimant is permitted to appeal by section 11(1) and the tribunal were right to consider that, in practical terms, the question for them was whether the benefits listed in the certificate of recoverable benefits had been paid in consequence of the relevant accident.  The claimant did not argue before the tribunal that the disablement pension and incapacity benefit listed in the certificate were not both paid to him at the rates, and for the periods, specified in the certificate.  Nor did he argue that they were not properly paid to him in respect of the relevant accident.

12.	Nonetheless, the Secretary of State concedes, and I accept, that the tribunal’s decision is erroneous in point of law because they did not consider the question whether incapacity benefit from 20 August 1999 had in fact been paid in respect of the relevant accident of 1 April 1997 or whether it had been paid in respect of the accident that had occurred earlier in 1999.  Although this point was not argued by the claimant before the tribunal, it was clearly raised by the evidence because, not only did the incapacity for work arise only after the second accident, but the initial medical certificates and the claim for incapacity benefit all referred to the condition caused by the second accident.  

13.	More importantly, the “all work test” assessment carried out on 13 October 1999, if correct and if read with the other evidence in the case, showed that the claimant would not have been awarded incapacity benefit at the time of the assessment if he had not suffered the second accident.  This is because a person is treated as incapable of work under the “all work test” (now known as a “personal capability assessment”) if he scores a total of fifteen points in respect of the physical descriptors listed in Part I of the Schedule to the Social Security (Incapacity for Work) (General) Regulations 1995 (see regulation 25(1)(a)).  The medical evidence suggests that only the claimant’s difficulties with lifting and carrying or reaching were attributable to the relevant accident and they were wholly attributable to it.  Equally, the claimant’s difficulties with sitting and bending and kneeling were plainly consequences of the second accident rather than the first.   

14.	If the assessments carried out on 18 October 1999 and 13 December 2000 were correct, the question whether the claimant was incapable of work at each of those dates due to the first accident, so that it can be said that incapacity benefit was paid “in respect of” that accident, presents itself in a neatly mathematical way.  On 18 October 1999, the claimant scored a total of eighteen points, of which eight were attributable to the relevant accident and ten were attributable to the later accident.  Thus neither accident had, at that date, given rise to sufficient disablement to entitle the claimant to incapacity benefit in respect of that accident alone but the total disablement caused by the two accidents did entitle the claimant to incapacity benefit.  By contrast, on 13 December 2000, the claimant scored a total of twenty-six points of which fifteen were solely attributable to the relevant accident, three were attributable to the second accident and eight were attributable to loss of hearing, which was presumably constitutional.  Thus, at that date, the first accident by itself was responsible for the claimant suffering sufficient disablement to be entitled to incapacity benefit, whereas the other causes did not, by themselves, cause sufficient disablement to entitle the claimant to incapacity benefit.

15.	If the claimant had been paid compensation in respect of the second accident as well as the first accident, so that there were two compensators, the Secretary of State plainly could not expect to recover incapacity benefit from both the compensators.  The 1997 Act makes no provision for apportioning liability between compensators.  It follows that Parliament must have intended liability to fall on just one compensator and that any payment of benefit should be attributed to no more than one accident.  In R(CR) 3/03, I held that benefit was not paid “in respect of” an industrial disease if it would have been payable due to constitutional conditions even if the industrial disease had not developed.  It seems to me that the same approach must be taken where the other cause of disablement is not constitutional but is a previous accident and that it can make no difference whether or not there has in fact been a successful claim for compensation in respect of both accidents.  This approach is relatively easy to operate and is similar to the approach taken where disablement is being assessed under regulation 11 of the Social Security (General Benefit) Regulations 1982.  

16.	Applying that test to the present case and assuming that the assessment on 18 October 1999 was correct, the payment of incapacity benefit at that date was attributable to the second accident and was not “in respect of” the first, and relevant, accident, because benefit would not have been payable if the second accident had not occurred.  However, if the assessment on 13 December 2000 was correct, it is clear that, by that date, the payment of incapacity benefit was not attributable to the second accident but was attributable to the first accident.  That is because benefit would not have been payable if neither accident had occurred but would have been payable in respect of the first accident even if the second accident had not occurred.  

My substituted decision on the facts

17.	In relation to incapacity benefit, I am prepared to accept the medical practitioners’ assessments as correct.  They do, of course, imply some worsening in the effects of the first accident between 18 October 1999 and 13 December 2000, as well as some improvement in the effects of the second accident.  While the other medical evidence does suggest that there was improvement in the effects of the second accident, it does not positively suggest worsening of the effects of the first accident.  The different assessments could merely reflect the claimant having described his symptoms differently.  On the other hand, any worsening would not necessarily have had to have been very great to give rise to different assessments and no party has argued that the assessments were wrong.  In particular, the neither the claimant nor the compensator has not sought to argue that the assessment of fifteen points in respect of reaching on 13 October 2000 was not reasonable.  I therefore accept those assessments.  The claimant’s incapacity for work must have become attributable to the first accident, rather than the second accident, at some point between 18 October 1999 and 13 December 1999.  I take that point to have been 18 May 2000, which is approximately half-way between the other two dates.  Accordingly, I allow the claimant’s appeal to the extent of finding that incapacity benefit paid before 18 May 2000 was not paid “in respect of” the accident on 1 April 1997 and should therefore not have been included in the certificate of recoverable benefits.

18.	It has not been submitted that the disablement pension paid during the relevant period expressly in consequence of the relevant accident on 1 April 1997 was not properly paid in respect of that accident.  I am satisfied that it is recoverable.

Jobseeker’s allowance

19.	I suggested at an early stage in these proceedings that the Secretary of State could have sought recovery of the jobseeker’s allowance paid to the claimant before he obtained his job in Peterborough and I commented that the Secretary of State seemed never to seek recovery of jobseeker’s allowance.  It is, of course, potentially recoverable because it is listed in Schedule 2 to the 1997 Act.  Mr Atkins informed me that the reason why recovery of jobseeker’s allowance is rarely sought is the difficulty of linking its payment to the relevant accident.  He told me that some £27,000 worth of jobseeker’s allowance had been included in certificates of recoverable benefits between November 2001 and August 2003 but that appeals had meant that the figure actually recovered had been a mere £14,642.  I appreciate that causation may not be as easy to establish as in the case of incapacity benefit but, even so, those sums appear very small.  Perhaps the real difficulty facing the Secretary of State is revealed in a letter dated 3 July 2001 sent by the Compensation Recovery Unit to the claimant’s solicitors following a review in the present case.   It appears that jobseeker’s allowance was included in the first certificate of recoverable benefits issued, because the letter states –

“However, regarding the payment of Job Seekers Allowance (JSA) as we are unable to retrieve copies of the claim papers from the local social security office so we have no choice but to consider this benefit non-recoverable, as we are unable to confirm why it was paid.”

Jurisdiction in respect of disputes over the operation of section 8(3) of the 1997 Act

20.	My substituted decision does not deal with the claimant’s main point, which is that it is unfair that his compensation has been reduced by benefits paid after the period in respect of which full compensation for loss of earnings was awarded.  Ever since the Social Security (Recovery of Benefits) Act 1997 came into force, there has been a steady stream of claimants appealing to tribunals on the same grounds as this claimant.  When they are unsuccessful, some of them seek leave to appeal to a Commissioner.  Leave to appeal is generally refused on the ground that the Commissioner has no jurisdiction to deal with the question whether the compensator has correctly made deductions from compensation, because the issue does not fall within the scope of section 11(1) of the Act.  Essentially, section 11(1) provides that tribunals and Commissioners are to deal with disputes between, on the one hand, the claimant or the compensator and, on the other hand, the Secretary of State, as to the benefits specified in the certificate of recoverable benefits.  Therefore, to the extent that a claimant’s complaint about the amount deducted under section 8(3) is really based on a complaint about the benefits specified by the Secretary of State in the certificate of recoverable benefits, the claimant is right to pursue the complaint by appealing against the certificate to a tribunal.  However, in the present case, and in those where leave to appeal is refused, the claimant contends that, even if the certificate of recoverable benefits correctly specifies the recoverable benefits, the compensator has still made too great a deduction under section 8(3).  That dispute, being a dispute solely between the claimant and the compensator, is a matter within the jurisdiction of the court dealing with the claim brought by the claimant against the compensator rather than a tribunal.

21.	It seems to me that the reason that claimants’ lawyers – in this case, counsel – often wrongly suggest that their clients should appeal to tribunals is that the legislation does not make explicit how a dispute between a claimant and a compensator as to the operation of section 8(3) can be brought before a court.  It may be that, in those cases where a dispute is anticipated before the trial of an action, the matter can be raised with the trial judge, who may be prepared to deal with the dispute at that stage.  However, that is not the procedure anticipated by the legislation.  Section 15 merely requires the court to provide the parties with the material to enable the compensator to make the appropriate calculation after the trial has concluded.  Therefore, if, after a court has given judgement for the claimant, a claimant considers that, given the certificate of recoverable benefits, too great a deduction has been made by the compensator under section 8(3), the claimant’s complaint must be considered to be that the sum paid by way of compensation is insufficient to discharge the claim under section 8(2).  Accordingly, in my view, a dispute as to the operation of section 8(3) that has not been considered by a trial judge may be brought before the court in proceedings to enforce the judgement of the court.  The need to bring a dispute about the operation of section 8(3) before a court rather than a tribunal implies that a claimant should not accept an offer to settle a case unless satisfied with the net sum on offer.  The decision of the Court of Appeal in Williams v. Devon County Council [2003] EWCA Civ 365 shows how the question of costs can be dealt with where there has been a payment into court and the only reason it has not been accepted is a bona fide dispute about the operation of section 8(3).  That decision also makes it plain, as Mr Atkins conceded at the hearing before me, that a claim may be regarded as “disposed of”, for the purposes of section 11(3) notwithstanding that there is an outstanding issue as to costs.  It seems to me that the same applies where there is an outstanding question as to enforcement.
 
The proper operation of section 8(3)

22.	Although I do not have jurisdiction to rule on the claimant’s main complaint, it is a matter of concern that many hopeless cases are brought before tribunals and Commissioners by claimants who have had the benefit of legal advice when seeking compensation and who consider that they have been unfairly treated under the 1997 Act.  It seems to me to be desirable fully to analyse that grievance, so that claimants can be told whether there really is unfairness and, if so, whether it is the inevitable effect of the legislation.  As the question has not yet been brought before a court of competent jurisdiction, I take the view that it is not inappropriate for a Commissioner to consider the problem and express an opinion on it in the hope that it will stem the flow of hopeless appeals within this jurisdiction.  The present case, in which I have been assisted by the arguments of Mr Atkins, affords an ideal opportunity, although it is regrettable, even if understandable, that the compensator has not taken part in these proceedings.  The Secretary of State will be able to reflect on my comments and consider whether any amendment to the legislation should be proposed.

23.	However, as will appear, my view is that the 1997 Act does not need amending.  On the contrary, it creates an elegant scheme, subtly balancing the competing interests of the claimant, the compensator and the Secretary of State.  Perhaps the way it is to be operated is not always as clearly spelled out as it might be, as R(CR) 1/02, R(CR) 3/03 and this case all illustrate.  Nonetheless, if one stands back from the detail, it seems to me to be clear what the intention of Parliament was when the Act was passed, and that shows how the Act is to be interpreted.

24.	In considering the purpose of the Act, it is useful to look first at its background.  Before 1989, there was no scheme enabling the Secretary of State to recover from a tortfeasor benefits paid in consequence of his wrongdoing.  However, as between claimant and compensator, provision was made for the adjustment of compensation payments to reflect the payment of benefits.  When the modern social security system came into being in 1948, there was enacted at the same time section 2 of the Law Reform (Personal Injuries) Act 1948, subsection (1) of which provided:

“In an action for damages for personal injuries (including any such action arising out of a contract), there shall in assessing those damages be taken into account, against any loss of earnings or profits which has 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 subsection 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.”

The effect of section 2 was that no deduction in respect of injury benefit, disablement benefit or sickness benefit could be made from compensation for loss of earnings in respect of any period more than five years after the cause of action had accrued (Jackman v. Corbett [1988] Q.B. 154).  Over the years, other benefits were included within the scope of the provision but there were always a number of benefits that fell outside it.  Where the statutory provision did not apply because the benefits were not within its scope, the common law required that social security benefits should generally be deducted from the gross compensation that would otherwise have been received by the claimant.  Income-replacement benefits were deducted from compensation for loss of earnings and attendance allowance and mobility allowance were deducted from compensation for the cost of care.  That is because damages are intended to be purely compensatory and, in the absence of any deduction, the claimant would be better off financially than he would have been had the accident not occurred (Hodgson v. Trapp [1989] A.C. 807).  Section 2 of the 1948 Act represented a compromise between that common law approach and the approach taken to benefits paid under private insurance schemes which the common law generally ignores.  Under both the common law and section 2, the tortfeasor was relieved of part of the cost of his wrongdoing because the claimant had already received some compensation from the benefits scheme.

25.	Section 22 of, and Schedule 4 to, the Social Security Act 1989 brought in the first scheme to enable the Secretary of State to recover benefits paid in consequence of an accident, injury or disease giving rise to a payment of compensation to the victim.  Under the scheme, a compensator obtained from the Secretary of State “a certificate of total benefit” listing the benefits paid within the relevant period, which, as now, was the period from the date of the accident to the date when compensation was paid, subject to a maximum of five years.  The compensator then deducted from the compensation otherwise due to the claimant “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” and paid that amount to the Secretary of State.  The claimant received only the balance of the compensation.  As now, either the claimant or the compensator, or both, could challenge the certificate once the compensation claim had been settled.  However, it was rare for compensators to appeal because, although the Secretary of State recovered the benefits from the compensator, he did so entirely at the claimant’s cost, so that the compensator had no interest in appealing.  Benefits received after the relevant period were ignored in the assessment of compensation.

26.	It gradually became clear that the draftsman of the 1989 scheme had overlooked the fact that most cases are settled before the case comes to court and that the element of compromise means that claimants are often under-compensated.  Furthermore, the scheme provided that benefits could be recovered notwithstanding that they had not mitigated any financial loss for which damages had been claimed.  The consequence of these deficiencies was that compensation was often reduced by vastly more than would have been justified under the common law and claimants found that not only their special damages but also their general damages were lost to the Secretary of State.

27.	The 1989 legislation was re-enacted as Part IV of the Social Security Administration Act 1992 in the general consolidation of social security law, but that was before the deficiencies of the scheme had become clear.

28.	The 1997 Act was introduced to remove those deficiencies.  The broad scheme of the legislation is easy to understand and so is its primary purpose, which is to require tortfeasors to reimburse the Secretary of State for the cost of benefits paid to injured persons during the relevant period as a result of the tortfeasor’s wrongdoing, while at the same time ensuring that claimants receive the proper amount of compensation due to them but no more.  It imposes a new burden on tortfeasors, who must now compensate both the claimant and the Secretary of State.

29.	In order to compensate the Secretary of State, the compensator is obliged, by section 4(1) to obtain a certificate of recoverable benefits before making a compensation payment to the claimant and is then obliged, by section 6(1) to pay to the Secretary of State the amount shown on the certificate.  That payment to the Secretary of State must be made immediately before the compensation is paid to the injured person.  He is entitled to challenge the certificate, but, by virtue of section 11(3), an appeal may be brought only after the claimant’s claim for compensation has been disposed of and the amount shown on the original certificate has been paid to the Secretary of State.  That prevents the Secretary of State from becoming caught up in any litigation between the claimant and the compensator.

30.	Under section 8(3), the compensator may recover from the injured person some, or all, of the amount that has been paid to the Secretary of State by deducting from the compensation payment the appropriate amount, as determined by the certificate.  Thus, where a deduction is made under section 8(3), the Secretary of State recovers benefits at the cost of the claimant rather than the compensator.  At first sight, that seems contrary to the primary purpose of the Act, which is to ensure that the tortfeasor bears the cost of the payment of benefits.  However, section 8(3) must be read alongside section 17, which provides that benefits will be disregarded in the assessment of damages.  Without section 8(3), a claimant would be overcompensated.  As it is, section 8(3) restores the common law position, as between the claimant and the compensator, in relation to benefits paid during “the relevant period”, but, due to the effect of section 6(1), with the Secretary of State having enjoyed the advantage of the deduction rather than the compensator.  Viewed from the perspective of the compensator, section 8(3) prevents him from having to pay a total sum that exceeds the amount of compensation that would be due to the claimant at common law plus the total amount of benefits paid during the relevant period in respect of the relevant accident.  At the same time, the claimant is fully compensated (at least in the eyes of the court awarding compensation) and the Secretary of State recovers all the benefits paid during the relevant period in respect of the relevant accident.  Because section 17 is, in practice, subject to section 8(3) in respect of “the relevant period”, its principal effect is to ensure that benefits are disregarded in assessing damages for future loss, as was the position under the 1948 Act and the 1989 scheme.

31.	The difficulty that arises in the present case does so because the Act does not spell out what is meant by “the gross amount of the compensation payment” or “the amount of recoverable benefit” in section 8(3), which provides for the latter to be deducted from the former.  Section 9(4) provides that “the gross amount of the compensation payment is the amount of the compensation payment apart from section 8” and that “the amount of any recoverable benefit is the amount determined in accordance with the certificate of recoverable benefits”.  Mr Atkins at first submitted that that meant that the whole of the benefits specified in the certificate always had to be deducted from the compensation payment, as the compensator did in this case, subject to the compensation payment attributable to the relevant head of damages being sufficient.  That, he submitted, was so even if the period in respect of which the compensation was paid was different from the period in respect of which the benefits were paid. 

32.	However, it is not necessary to read sections 8(3) and 9(4) in that way and many compensators do not.  When making payments of compensation in respect of, say, two years’ loss of earnings, they deduct only two years’ worth of benefits, even if the certificate of recoverable benefits specifies benefits paid over a longer period.  They then challenge the certificate, presenting to the Secretary of State and, if necessary a tribunal, the evidence that led the compensation case to be determined or settled on the basis of two years’ loss of earnings.  Such challenges often succeed.  If they do not, it is either because the payment of benefit for a longer period is not in fact inconsistent with the basis on which the compensation case was determined or settled or because the Secretary of State and the tribunal are not bound to make a decision that is consistent with the court’s (see section 12(3)) and have taken a different view of the case.  That seems to me to be how the scheme should operate.  In other words, it is implicit in section 8(3) that the amount of recoverable benefit to be deducted from the gross compensation is only that amount that the gross payment of compensation is intended to replace.  Or, to put it yet another way, benefits may be deducted from compensation only to the extent that they were paid during a period in respect of which relevant special damages have been recovered by the claimant.

33.	If that approach is not taken and the compensator deducts all the benefits paid within the period covered by the certificate of recoverable benefits even if relevant special damages have not been recovered by the claimant in respect of the whole of that period, the result is patently unfair.  As between the claimant and the compensator, the claimant is under-compensated (taking the proper level of compensation to be that fixed by the court) and the compensator is relieved of part of the total cost of his wrongdoing.  The Secretary of State recovers all the relevant benefits, but does so entirely at the cost of the claimant (unless the compensation due under the relevant head of damages is too low).  In effect, the claimant has to pay back to the Secretary of State payments made over a period in respect of which he has not received compensation.  There are, of course, a few cases where a personal injuries claim throws up evidence that enables the Secretary of State to recover benefit from a claimant under section 71 of the Social Security Administration Act 1992, on the ground that the claimant has misrepresented, or failed to disclose, a material fact.  However, those are rare and, where there is no such misrepresentation or breach of the duty to disclose, I fail to see why a claimant should be required, in effect, to repay benefits to the Secretary of State merely because he has received compensation, when the period in respect of which the compensation has been paid is different from the period in respect of which the benefits were paid.  Furthermore, making an excessive deduction under section 8(3) pushes the burden of appealing against a certificate of recoverable benefits on to a claimant, who is usually in no position to argue an appeal because his case is that the benefits specified in the certificate were properly paid in respect of the relevant accident.

34.	In my view, the Act expects a compensator to act consistently.  If the gross amount of compensation is based on the claimant having no loss of earnings in respect of a period, it is not consistent for the compensator to deduct from that compensation income-replacement benefits paid during that period.  If such benefits are specified in the certificate of recoverable benefits, it is for him to appeal against the certificate and explain why the Secretary of State, who was not a party to the assessment of the gross amount of compensation, ought not to have paid those benefits and is not entitled to recover them from the compensator (R(CR) 1/02).  An appeal tribunal is not bound to reach a decision that is consistent with the decision of a court (see section 12(3)) and may be even less likely to reach a decision that is consistent with a payment of compensation that is the result of a compromise settlement between the claimant and the compensator.  However, the compensator can scarcely complain if that is because the tribunal considers the claimant to have been under-compensated.

35.	There is a complication arising out of the fact that disablement pension is listed in Schedule 2 to the Act as a benefit deductible from compensation for loss of earnings.  Strictly speaking, disablement pension is not an income-replacement benefit and a person may be entitled to it even though he has returned to his former employment and has the same earnings as before the relevant accident.  On the other hand, where a person has lost earnings as a result of the disablement in respect of which the disablement pension is payable, it is not illogical to regard the benefit as compensation for that loss of earning capacity.  The legislation therefore works if disablement pension is deemed to be paid in respect of loss of earnings for the purposes of the Act and only to be deductible where it has been paid during the period in respect of which compensation for loss of earnings has been paid.  Nevertheless, there remains an anomaly in that, to the extent that disablement pension has been paid in respect of a period when the claimant had no lost earnings, it may be recoverable by the Secretary of State from the compensator but not be deductible by the compensator from the compensation paid to the claimant.  

36.	The same anomaly existed in section 2 the 1948 Act.  This led to the decision of Slade J in Stott v. Sir William Arrol & Co. Ltd. [1953] 2 Q.B. 92 where he held that special damages for loss of earnings for five weeks were entirely extinguished by a deduction under section 2 in respect of disablement benefit paid after the claimant had returned to work at his pre-accident wage.  He declined to read into section 2 any words implying that the benefit could be deducted from damages for loss of earnings only during the period in which the losses were sustained.  That is the opposite approach to the one I would take in relation to section 8(3) of the 1997 Act.  However, although the decision may have made sense in relation to the 1948 Act, where the Court was concerned only with the rights of the claimant and the compensator under a statute based on an artificial compromise between conflicting principles, it will be apparent that, for the reasons I have given, I do not consider that the same approach makes sense under the 1997 Act where the rights of the claimant, compensator and Secretary of State are all balanced under an Act based on a single compensatory principle.

37.	I must also accept that my approach is not entirely supported by the decision of the Court of Appeal in Williams v. Devon County Council [2003] EWCA Civ 365.  However, not only was the relevant part of the Court’s decision (in particular the worked examples (c) and (d) in paragraph [18]) obiter dicta – like this part of my decision – but also, and more importantly, the Court appears to have received no argument on the particular issue that I am now considering and did not directly address it.  The Court did make it plain that a compensator must properly carry out the calculation required by section 8 and they said, at paragraph [29], that “the touchstone … is that the claimant is entitled to the full value of his general damages claim”.  I would respectfully suggest that he is also entitled to a proper proportion of his special damages claim.

The appropriate deduction in the present case

38.	The present case arises out of a decision of a court in proceedings in which the compensator successfully resisted the greater part of the claimant’s claim.  The deduction by the compensator of incapacity benefit paid to the claimant from 20 August 1999 from the compensation due under the court’s order was inconsistent with the court’s decision, which was favourable to the compensator, that the claimant had not been incapable of work due to the relevant accident from 1 April 1999.  It meant that the claimant was not fully compensated for the loss the court found the claimant had suffered due to the relevant accident.  The claimant’s complaint on that ground seems to me to be well founded.  If my approach to section 8(3) is correct, the compensator should not have made that deduction, but it would have been open to the compensator to appeal to the tribunal and argue that, in the personal capability assessment on 13 December 2000, the claimant’s disability in respect of the relevant accident had been over-assessed and that the payments of incapacity benefit from 18 May 2000 should be attributed to the second accident or should not have been made at all.  That would have been consistent with the stance taken by the compensator in the personal injuries proceedings.  As it is, of course, no such argument was advanced before either the tribunal or me.

39.	However, even on my approach to section 8(3), the disablement pension was deductible, not only during the period before 1 April 1999 but also so as to extinguish the £1,000 per annum compensation for loss of earnings awarded from then until the end of the relevant period covered by the certificate of recoverable benefits.  In my view, only the small part of the disablement pension paid from 1 April 1999 that exceeded that compensation for loss of earnings ought not to have been deducted.

40.	There is, of course, yet another complication in the present case, as there was in Williams v. Devon County Council [2003] EWCA Civ 365, because the court made a finding of contributory negligence.  The logic of the approach I have suggested to section 8(3) is that the calculation under section 8 should be made before the amount of compensation is reduced to take account of the contributory negligence.  That, again, is not quite the approach taken in Williams but it is the approach that was taken in the 1948 Act (see section 2(3)).  It ensures that the claimant is properly compensated.  A compensator may feel hard done by, because he has to pay the Secretary of State the full amount of the benefit even though he is entitled to recover only a proportion of it from the claimant.  However, the Secretary of State is not entitled to recover any benefit from the claimant despite the fact the claimant’s contributory negligence was part of the reason for it being paid.  The argument against the compensator is therefore that, as the Secretary of State has incurred the whole cost of the benefit and has not himself been guilty of any negligence, the Secretary of State ought to be able to recover the whole amount of benefit from the compensator.  That seems to me to explain why the Act makes no specific provision for cases of contributory negligence.  

41.	I must stress that my conclusion on the proper operation of section 8(3) is on a question that is not within my jurisdiction.  I have considered this issue because the issue is of importance to many claimants and, as far as I am aware, the courts, who do have jurisdiction, have not yet given an authoritative decision in a case where there has been full argument.   My view is that section 8(3) is widely misunderstood and that many claimants suffer serious injustice as a result.  However, because this issue is not strictly within my jurisdiction, my conclusion on it is not binding on the compensator.  The compensator may choose to accept it and make a further payment to the claimant, in addition to passing on the refund from the Secretary of State that is due as a result of my decision.  If not, the claimant will have to consider obtaining further legal advice as to whether it is still possible to make an appropriate application in the Weymouth county court to test my approach and obtain a further payment from the compensator finally to satisfy the judgement of that court.

(Signed on the original)	MARK ROWLAND
Commissioner
15 October 2003