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Damages for Personal Injury: Collateral Benefits Consultation

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Damages for Personal Injury: Collateral Benefits Consultation PART I INTRODUCTION 1. THE MEANING OF COLLATERAL BENEFITS AND MAIN ISSUES 1.1 In this paper we deal with the treatment of what lawyers term “collateral benefits” in the calculation of damages for personal injury.1 Using jargon-free language we can say that we are considering the extent to which an injured person may recover compensation from both the tort system and from another source. For example, should an injured plaintiff be entitled to recover full damages plus sick pay provided by his or her employer and/or a voluntary payment made by his or her trade union and/or the proceeds of a personal accident insurance policy? This problem of overlapping compensation frequently arises and has long perplexed the courts. It raises complex issues of policy. 1.2 We must also make clear the central strategic importance of this issue. If collateral benefits are deducted, the quantum of damages for personal injury is reduced. One argument that we shall consider is that such deduction is merited because while not unduly prejudicing plaintiffs, who will be fully compensated in any event, deduction reduces the costs of the tort system. The savings could instead be used to improve provision for the ill and injured. Indeed the savings could be used to fund provisional recommendations which will increase tort damages, that we have put forward in other aspects of this damages project. 1.3 A collateral benefit is a payment or benefit in kind (other than the tort damages being claimed) which the tort victim would not have received but for the tort.2 Although the term collateral benefit has the shortcoming that it may be taken to imply that the benefit is in some sense unrelated to the tort, when the opposite is true, in our view it may nevertheless usefully be employed as a term of art. 1.4 The central issues to be considered in this paper are: first, whether payments (or benefits in kind) received or to be received as a result of an injury should be deducted from damages or ignored; and secondly, whether the provider of the payment (or benefit in kind) should have the right to recover its value from the 1 The treatment of collateral benefits in Fatal Accidents Act claims is dealt with as part of our Consultation Paper No 148 on claims for wrongful death, which is being published on the same day as this paper. The issue of how to treat a collateral benefit can also arise in other contexts, for example where damages are claimed in respect of property damage or wrongful dismissal. While consistency across all areas is desirable, we do not directly address in this paper collateral benefits in other areas, both because the law’s treatment of collateral benefits elsewhere is heavily dependent on the central area of personal injury damages and also because we wish to avoid overcomplicating a paper that already raises extremely difficult issues. 2 Although the cause of action will almost invariably be tort (and we shall throughout assume this to be the case unless the contrary is stated) the same law applies and should apply, if the claim for personal injury is based on a breach of contract. 1 tortfeasor (or from the victim).3 Although we shall be focusing on payments the same law does, and should, apply to benefits in kind.4 1.5 The key difficulty in this area of the law resides in the conflict between the fundamental principle that (leaving aside exceptional measures of damages)5 tort damages are designed to compensate but not to overcompensate,6 and a set of policy arguments favouring overcompensation. If tort damages are compensatory, recovery by the plaintiff of damages for a loss which has already been, or will be, met from elsewhere would, on the face of it, be wrong. Yet for some collateral benefits but not others the courts have found this to be acceptable. This paper is primarily concerned to establish whether the case law resolution of the tension between the principle against double recovery and the policy arguments for it is in need of amendment. 1.6 The case law on collateral benefits in personal injury claims deals with charitable payments, insurance payments, sick pay, disablement pensions, retirement pensions, redundancy pay and social security benefits. Accordingly we primarily direct our attention to those specific collateral benefits.7 3 The judiciary has over the years grappled with the first question, while the second has received less attention. 4 An exception to this is the provision of services (eg gratuitous nursing services) which has been treated in English law as raising distinct issues and was dealt with by us in our Consultation Paper, Damages for Personal Injury: Medical Nursing and Other Expenses, (No 144, 1997). In that paper we did not treat gratuitous nursing services as falling within the law on collateral benefits because, in our view (consistently with Hunt v Severs [1994] 2 AC 350) it is artificial to regard the plaintiff as suffering an initial pecuniary loss which is met by the gratuitous services. That is, the question of the gratuitous services being a benevolent collateral benefit does not arise. But if one does regard the plaintiff as incurring an initial pecuniary loss, constituted by the need for services (ie the factual necessity to incur expense) the question of whether to deduct the value of the services as a collateral benefit would arise. Allowing the plaintiff to recover damages for the carer is best seen alongside the discussion in paras 2.84-2.88 below as a further method of allowing a third party to recover the value of the collateral benefit from the victim (based perhaps on the restitutionary concepts of “necessitous services” or “free acceptance”: see CP 144, paras 2.29 and 3.45). We should add that the policy reasons we expressed in CP 144 for our provisional recommendation that - contrary to Hunt v Severs - damages should be recoverable even on behalf of the tortfeasor carer (eg that otherwise tort victims would be encouraged to enter into contractual arrangements for the provision of care either with other relatives or friends or with commercial care providers) do not appear to be applicable to other examples of the tortfeasor being the provider of the collateral benefit. 5 Most obviously, exemplary damages which are concerned to punish the defendant. See generally Aggravated Restitutionary and Exemplary damages, (1993) Consultation Paper No 132. 6 See for example Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, 39; Shearman v Folland [1950] 2 KB 43, 49; British Transport Commission v Gourley [1956] AC 185, 197; Lim Poh Choo v Camden and Islington Area Health Authority [1980] AC 174, 186; Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 WLR 433, 456; Swingcastle Ltd v Alastair Gibson [1991] 2 AC 223. Also H McGregor, “Compensation Versus Punishment in Damages Awards” [1965] MLR 629, 633; J Fleming “Collateral Benefits” International Encyclopaedia of Comparative Law (1970) Vol XI, Chapter 11, p 7; A S Burrows Remedies for Torts and Breach of Contract (2nd ed 1994), p 125. 7 However the treatment of most social security benefits paid as a result of tortiously caused personal injury is governed by the Social Security Administration Act 1992, which provides 2 2. OUR DAMAGES PROJECT 1.7 This is the sixth consultation paper arising from the Law Commission’s current review of damages. Under item 2 of the Sixth Programme of Law Reform8 we are to examine “the principles governing, and the present effectiveness of, damages for monetary and non-monetary loss, with particular regard to personal injury litigation”. Certain matters to which “specific consideration is to be given include... (a) deductions and set-offs against monetary loss (excluding unless expressly approved, the recovery provisions of the Social Security Administration Act 1992)9...”. We should emphasise from the outset that, in line with our terms of reference,10 our role in this review is not to advocate the replacement of the existing tort system but rather, assuming its continued existence, to recommend improvements to it. 1.8 The five previous consultation papers dealt with structured settlements and interim and provisional damages;11 aggravated, exemplary and restitutionary damages;12 liability for psychiatric illness;13 non-pecuniary loss in personal injury cases;14 and medical, nursing and other expenses in personal injury cases.15 A consultation paper on claims for wrongful death is being published on the same day as this paper.16 We have published a Report on structured settlements and interim and provisional damages,17 and its recommendations have largely been implemented.18 We have also published a report containing a study based on the results of a large-scale survey of victims of personal injury.19 for recoupment by the state from the tortfeasor of social security benefits paid to tort victims. The Social Security (Recovery of Benefits) Act 1997, which is to be brought into force in October 1997, has made changes to the operation of the recoupment scheme. See paras 2.71 & 2.72 below. The recoupment scheme is excluded from consideration by our terms of reference - see para 1.7 below - so we essentially confine our consideration of social security benefits to those to which the scheme does not apply. 8 Sixth Programme of Law Reform (1995) Law Com No 234, item 2: formerly Fifth Programme of Law Reform (1991) Law Com No 200, item 11. 9 But see the Social Security (Recovery of Benefits) Act 1997 (para 1.6 n 7 above). 10 See especially the description of item 11 of the Fifth Programme of Law Reform (1991) Law Com No 200.
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