R(CR) 2/03
Mr. M. Rowland CCR/3808/2000
15.11.02
Compensator's appeal to tribunal after deducting amount of certificate of recoverable benefits from payment into court – scope of appeal
The claimant sued her employers in respect of an accident at work. The compensator made a net payment into court after deducting under section 8 of the Social Security (Recovery of Benefits) Act 1997 ("the Act") the amount specified in the certificate of recoverable benefits issued under the Act. The claimant accepted the net payment in. The claimant subsequently asked for a review of the certificate on the grounds that if the accident had not happened psychological problems would have prevented her from working after age 60 but she would not have experienced any significant back pain before age 65, with the consequence that her claim for damages had not included loss of earnings after age 60 or loss of mobility. The Secretary of State confirmed the certificate. The compensator then appealed on alternative grounds either that the claimant's condition was largely constitutional or, adopting the claimant's own ground of review, that as she would have been unable to work after age 60, benefits paid after her 60th birthday were not recoverable. The tribunal allowed the appeal finding that benefit paid since the claimant's 60th birthday, was not paid in respect of injuries sustained in the accident. The Secretary of State appealed on the ground of the inadequacy of the tribunal's reasons for their finding.
Held, allowing the appeal, that:
- as no appeal lay to a tribunal against a deduction under section 8 of the Act, any dispute as to the entitlement of a compensator to make such a deduction was to be determined by the court seized of the compensation proceedings and accordingly the claimant's remedy had been to refuse to accept the payment in unless the deduction was reduced (paragraph 5);
- if a compensator made a deduction under section 8 of the Act, that implied an acceptance that the benefits were paid in consequence of the relevant accident and it was inconsistent then to argue that they were not (paragraph 10);
- regulation 11 of the Social Security (Recovery of Benefits) Regulations 1997 (S.I. 1997 No. 2205) provided for adjustments to be made between the parties where a review of or an appeal against a certificate of recoverable benefits resulted in the certificate being revoked and/or replaced with a fresh certificate which had the consequence that a compensator had no interest in appealing against a certificate where the whole of the amount of the certificate had been deducted under section 8 from compensation due to the claimant (paragraph 11);
- the tribunal's decision was erroneous in point of law because the reasons given for their decision were not supported by evidence, being based on a misunderstanding of the claimant's grounds for applying for the review (paragraph 14);
- a tribunal hearing an appeal under the Act should generally have regard to the basis on which a case is settled by parties acting with the benefit of legal advice and should be slow to accept an argument advanced by a compensator that is inconsistent with a section 8 deduction unless it is supported by the claimant who is the only person who actually has any interest in it or an argument advanced by a claimant that is inconsistent with the basis on which compensation was obtained or upon which benefits were claimed (paragraph 16).
The Commissioner substituted his own decision confirming the original certificate of recoverable benefits.
DECISION OF THE SOCIAL SECURITY COMMISSIONER
- I allow the Secretary of State's appeal. I set aside the decision of the Liverpool appeal tribunal dated 22 June 2000 and I substitute my own decision which is to confirm the amounts, rates and periods specified in the original certificate of recoverable benefits, dated 28 September 1998.
REASONS
- This appeal is brought under the Social Security (Recovery of Benefits) Act 1997. Under section 6 of that Act, a person paying compensation (a "compensator") to another (a "claimant") in respect of an accident, injury or disease is liable also to pay the Secretary of State the amount of benefits listed in a certificate of recoverable benefits issued by the Secretary of State. The certificate lists benefits paid to the claimant in respect of the relevant accident, injury or disease during a period which runs from the date of an accident until the compensation is paid or the expiry of five years, whichever is sooner. The purpose of the legislation is therefore clear; it is intended to ensure that tortfeasors reimburse the Secretary of State for expenditure incurred as a consequence of their wrongdoing. Under section 8, the compensator may deduct from the compensation that would otherwise be payable an amount in respect of certain of the listed benefits, but only insofar as the benefits are stated in Schedule 2 to be relevant to compensation in respect of loss of earnings, loss of care or loss of mobility and only insofar as compensation is paid in respect of those heads. This ensures that a claimant does not receive, and the compensator does not pay, double compensation for the injury. In effect, the social security benefit is recovered from the claimant by the compensator on behalf of the Secretary of State. Under section 10, the Secretary of State may review a certificate of recoverable benefits. Under section 11, a compensator and, in a case where there has been a deduction under section 8, a claimant may appeal against a certificate of recoverable benefits. However, by section 11(3), the appeal may not be brought until the compensation has been paid to the claimant and the sum due under section 6 has been paid to the Secretary of State. That ensures that the Secretary of State does not become embroiled in the arguments between the claimant and the compensator. By section 12, any appeal is heard by an appeal tribunal and a successful appeal results in the certificate being revoked and, if appropriate, a fresh certificate being issued by the Secretary of State in accordance with the decision. Under section 13, there is a further right of appeal, on a point of law, to a Commissioner.
- In this case, the claimant sued her employers in respect of an accident she had suffered at work on 25 November 1993. On 24 August 1998, the defendant employers, the compensator, gave notice that they had paid £37,652.18 into Court but had withheld £32,652.18 under section 8 of the 1997 Act. In consequence, the net payment in was only £5,000. The withheld payment represented all the social security benefits listed in a certificate of recoverable benefits, dated 28 September 1998 but presumably issued by the Secretary of State before then, as having been paid to the claimant in respect of the relevant accident. The claimant accepted the payment in on 14 September 1998.
- On 21 September 1998, the claimant's solicitors sought a review of the certificate of recoverable benefits on the ground that psychological problems would have prevented the claimant from working after the age of 60 even if the accident had not happened but that she would not have experienced any significant pain in her back before the age of 65 if the accident had not happened. The consequence had been that she had been unable to claim for loss of earnings after the age of 60. She had also not claimed in respect of loss of mobility. It was argued that disablement pension (which although not actually paid in respect of loss of earnings is curiously listed against paragraph 1 of Schedule 2 to the 1997 Act as a benefit that is deductible under section 8 from a compensation payment made in respect of loss of earnings) paid from the claimant's 60th birthday should not be recoverable and nor should the mobility component of disability living allowance. On 5 November 1998, the Secretary of State confirmed the certificate. The claimant did not appeal against the certificate.
- In my view, the application for review had been misconceived and any appeal would have been equally misconceived. The claimant's case was that her physical disablement throughout the period covered by the certificate was attributable to the relevant accident. On the evidence, the disablement pension and mobility component had plainly been paid in respect of that physical disablement. The claimant's quarrel was therefore not with the certificate of recoverable benefits but with the compensator's deduction under section 8. As has been pointed out in CCR/3396/2000, no appeal lies to an appeal tribunal against a deduction made under section 8. Any dispute as to the entitlement of a compensator to make such a deduction is to be determined by the court seized of the compensation proceedings, either by attributing compensation to the appropriate head, as required by section 15(2) of the 1997 Act, which will often resolve the issue or in enforcement proceedings. In the present case, the claimant's remedy had therefore been to refuse to accept the payment in unless the deduction was reduced. It is true that CPR rule 36.23(4), which came into force after the settlement in the present case, provides that, for the purposes of rule 36.20 a claimant fails to better a Part 36 payment if he fails to obtain judgment for more than the gross sum specified in the Part 36 payment notice (which, under rule 36.23 must specify the gross compensation, the details of benefits deducted under section 8 of the 1997 Act and the net amount after the deduction of those benefits) but if the claimant has succeeded in showing that benefits were wrongly deducted it is to be presumed that a court would find it "unjust" to order him to pay the costs of that challenge under rule 36.20(2).
- While the claimant did not appeal against the certificate of recoverable benefits, the compensator did. The main ground was based on an assertion that the claimant's condition was largely constitutional and that the incident on 25 November 1993 had been responsible for symptoms only for a period of six months. Alternatively, relying on the same point that had been relied on by the claimant on her application for review, it was argued that, as there was evidence that the claimant would in any event have been unable to work after the age of 60 due to unrelated psychological factors, benefits paid after 26 May 1996 were not recoverable. The Secretary of State, relying on Hassall v. Secretary of State for Social Security [1995] 1 WLR 812 (also reported as R(CR) 1/95), submitted that the evidence showed that all the benefits had been paid in respect of disablement due to the relevant accident, even if a constitutional condition contributed to the claimant's disablement.
- The Secretary of State also said that the certificate of recoverable benefits should have indicated that further amounts would be recoverable in respect of any period before the payment into court was accepted that was within five years of the accident but he conceded that it was by then too late to recover such further sums. I would add that it also looks as though the certificate omitted the mobility component of disability living allowance from 10 August 1994 to 11 October 1994 as I can see no reason for that component not having been awarded from the date of claim, as was the care component. As the Secretary of State does not seek recovery of benefits not listed on the certificate, nothing now turns on these two points but it is remarkable how many of the certificates I have seen have contained errors.
- The claimant was notified of the hearing but neither she nor the Secretary of State appeared or was represented before the tribunal. That the Secretary of State should fail to send a representative in a case involving over £32,000 seems extraordinary. Be that as it may, the compensator was represented by a solicitor who advanced the arguments in the original notice of appeal and who referred to the claimant's application for review in support of the alternative ground. The tribunal decided that the claimant had suffered injury as a result of the relevant accident until 26 May 1996, the claimant's 60th birthday, saying in the decision notice :
"We consider that from the date of the appellant's [sic] 60th birthday the effects of the injuries sustained in the accident would have ceased and been replaced by constitutional causes unconnected to the accident. Any benefit paid since 26.5.96 is not in our judgment, paid in respect of the injuries in question."
In the statement of reasons, the chairman said:
"In the tribunal's view, it is not enough simply to consider whether as a matter of history benefit was paid with the accident as its stated cause, but that the tribunal should actually look at the reality, in light of all the available evidence. In the light of evidence available to this tribunal which was not available to the Adjudicating Medical Authority (AMA), the tribunal conclude that the assessment of the injured party's own solicitors as to the extent of the effects of the injury should be adopted."
- The Secretary of State now appeals with the leave of the tribunal chairman. He originally appealed on grounds that challenged the tribunal's power to look behind the awards of benefit, but those grounds have been abandoned in the light of the decisions of the Tribunal of Commissioners in R(CR) 1/02 and R(CR) 2/02. Now, the reasoning of the tribunal in relation to their finding of fact is challenged. The compensator's solicitors at first resisted the challenge but now accept that the compensator does not have any interest in the appeal at all and, indeed, did not have any interest in appealing to the tribunal. Instead, it is the claimant, who has been made a party to this appeal, who has the only interest opposed to the Secretary of State's.
- This state of affairs arises because the compensator deducted under section 8 the whole of the amount specified in the certificate of recoverable benefits from the compensation due to the claimant. It would be wholly inconsistent with the scheme of the Act if a compensator could recover from a claimant an amount in respect of benefits and then not pay that amount over to the Secretary of State. The result would be that the compensator would be relieved of part of the cost of his wrongdoing at the expense of either the claimant or the Secretary of State, depending on the circumstances. To put matters another way, a section 8 deduction implies an acceptance by the compensator that all the benefits were paid in consequence of the relevant accident and it is inconsistent then to argue before a tribunal that they were not.
- It is therefore not surprising that the legislation makes provision for a case where there has been a section 8 deduction and an appeal against a certificate of recoverable benefits is later successful. Regulation 11 of the Social Security (Recovery of Benefits) Regulations 1997 (SI 1997 No. 2205), made under section 14 of the Act, provides for adjustments to be made where a review or an appeal results in a certificate of recoverable benefits being revoked and/or replaced with a fresh one. Paragraphs (1) to (3) deal with adjustments as between the Secretary of State and the compensator and are not confined to cases where there has been a deduction under section 8. Under paragraph (1), the Secretary of State is obliged to pay to a successful compensator "the difference between the amount that has been paid and the amount that ought to have been paid". Paragraphs (4) to (7) deal with adjustments as between the compensator and the claimant. In particular, paragraphs (4) and (5) provide:
"(4) This paragraph applies where –
(a) the amount of the compensation payment made by the compensator was calculated under section 8; and
(b) the Secretary of State has made a payment under paragraph (1).
(5) Where paragraph (4) applies, the amount of the compensation payment shall be recalculated under section 8 to take account of the fresh certificate of recoverable benefits and the compensator shall pay the amount of the increase (if any) to the person to whom the compensation payment was made."
The consequence is that, where a compensator succeeds in showing that benefits should not have been included in the certificate of recoverable benefits, he must pay to the claimant, out of the money received from the Secretary of State under paragraph (1), additional compensation to make up for any section 8 deduction made in the original compensation payment in respect of those benefits.
- What happened in the present case after the appeal tribunal decision was received was that, notwithstanding the fact that he proposed to apply for leave to appeal, the Secretary of State issued a fresh certificate of recoverable benefits and, under regulation 11(1), paid to the compensator's solicitors £12,598.05. On 4 July 2000, the Compensation Recovery Unit wrote to the solicitors of both the compensator and the claimant telling them that an appropriate refund should be made by the compensator to the claimant if there had been a deduction under section 8. The compensator's solicitors replied stating that they did not accept that the claimant was due a refund. I have not seen the text of that correspondence and I am not told that there was any further correspondence from either the Compensation Recovery Unit or the claimant's solicitors. I suspect that no reference was made to regulation 11(4) and (5) because, if the terms of that legislation had been drawn to the attention of the compensator's solicitors, I have no doubt that they would have accepted then that the whole of the £12,598.05 had to be paid to the claimant. As it is, they now accept that that is the position, although they have sensibly suggested that they should retain the money until this appeal is determined and then pay it to the Secretary of State or the claimant as is appropriate.
- Although the claimant had not exercised her own right of appeal to the tribunal, she was made a party to the compensator's appeal before the tribunal. Regulation 1(2) of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 (SI 1999 No. 991) defines "party to the proceedings" so as to embrace anyone "who has a right of appeal to an appeal tribunal under section 11(2) of the 1997 Act", which includes a claimant where there has been a section 8 deduction. If that provision is to be construed literally, the claimant was rightly made a party to the proceedings before the tribunal, although I am at a loss to see why she should have been because she did not have any real interest in the outcome. She was liable to receive a windfall if the compensator was successful but that was only if the tribunal accepted that the disablement that she attributed to the relevant accident was not so attributable. It seems to me that the 1997 Act contemplates a series of bipartite proceedings – between claimant and compensator, between claimant and Secretary of State and between compensator and Secretary of State – rather than any tripartite proceedings, although if a claimant and compensator both appeal against a certificate of recoverable benefits, their appeals should be heard together. On the other hand, the claimant has been made a party to the appeal before me because, having received a windfall – or, at least, the right to a windfall – in consequence of the tribunal's decision, she has a practical interest in the Secretary of State's attempt to remove it from her, even though there may be little she can say in defence of it.
- I turn, at last, to the merits of the Secretary of State's appeal. I agree that the tribunal's decision is flawed. There was certainly evidence upon which the tribunal could have found that the claimant's disablement from about the time of her 60th birthday was not attributable to the relevant accident. However, the tribunal were wrong to base that conclusion on "the assessment of the injured party's own solicitors". It had never been suggested by the claimant's solicitors that she did not suffer disablement attributable to the accident after her 60th birthday. What they suggested in the application for review was only that her loss of earnings after that date was not attributable to the relevant accident because she would in any event have ceased work. Accordingly, the tribunal's decision must be set aside as being erroneous in point of law because the reasons given for their decision were not supported by the evidence.
- I can substitute my own decision. Dr. H. A. McClelland, the consultant psychiatrist whose report on the claimant's mental condition led the claimant's solicitors to take the approach they did, doubted that the claimant had any physical disablement, or any mental disablement attributable to the accident, after her 60th birthday, but he conceded that the question of the extent of her physical disablement was a matter for orthopaedic specialists. The orthopaedic specialists were divided. Mr. C. A. Campbell FRCS took the view on 19 January 1997 that the claimant still had significant disabilities, attributable to the relevant accident, that were likely to be permanent. Mr. V. W. Burton FRCS took the view on 28 February 1997 that the relevant accident caused injuries that would have been "responsible for ongoing symptoms for up to 6 months", although he accepted that she was incapable of work due to constitutional features. In effect, the tribunal adopted a compromise between those two positions, which would have been open to them but was not justified by their reasoning. As their reasoning was flawed, I must form my own view.
- The compensator has naturally relied on Mr. Burton's opinion throughout these proceedings. However, the compensator's reduction of the compensation payment implied an acceptance that disablement had lasted throughout the relevant period. In my view a tribunal hearing an appeal under the 1997 Act should generally have regard to the basis on which a case is settled by parties acting with the benefit of legal advice, although they are not bound to do so as they are under section 12(3) where a court has determined a claim. They should generally be slow to accept an argument advanced by a compensator that is inconsistent with a section 8 deduction made by the compensator, unless it is supported by the claimant who is the only person who actually has any interest in it. They should also be slow to accept an argument advanced by a claimant that is inconsistent with the basis upon which compensation was obtained or upon which benefits were claimed. In the present case, I am not minded to accept the compensator's argument, which is, of course, inconsistent with Mr. Campbell's opinion. The claimant has not argued that the benefits were not paid in consequence of the relevant accident. Her entitlement to disablement pension depended on her disablement being attributable to that accident. Her entitlement to benefits paid in respect of incapacity for work and to disability living allowance was not dependant on there being any particular cause for her disablement but the disablement relied upon in her disablement pension claim was a substantial part of the disablement relied upon in her other claims. The Secretary of State has not given any indication he is minded to revise or supersede the award of disablement pension and such action would be inconsistent with the position taken on this appeal. In these circumstances, while I do have some doubts as to the extent to which the claimant's disablement was attributable to the relevant accident throughout the relevant period, I am not satisfied that any of the listed benefits were "paid otherwise than in respect of the accident" on 25 November 1993. Accordingly, I allow the Secretary of State's appeal and confirm the original certificate of recoverable benefits. The £12,598.05 will therefore be repaid to the Secretary of State by the compensator.
- I draw the Secretary of State's attention to two issues in respect of which he may wish to consider amendments to the legislation. Firstly there is the question whether a claimant or a compensator who has not exercised his or her right of appeal under section 11 of the 1997 Act should automatically be made a party to an appeal brought by someone else. Second, it might be wise to make specific provision in regulation 11 of the 1997 Regulations for further adjustments following the determination of an appeal to a Commissioner and, perhaps, also for suspending, or empowering a tribunal chairman or Commissioner to suspend, the operation of the regulation, or parts of the regulation, pending such an appeal.
| Date: 15 November 2002 |
(signed) Mark Rowland
Commissioner |
