Law Report: Social security benefits claim should be included

The social security benefits paid to an unemployed person are, after an accident, replaced by benefits which the Secretary of State is entitled to recoup from damages as benefits paid to the person as a consequence of the accident. Therefore, to a void undercompensation for the injuries suffered in the accident, the unemployed person's claim for damages should include a claim for the loss of non-recoupable benefits which had been replaced.

The Court of Appeal dismissed appeals by the plaintiffs from a social security commissioner's decision that the Secretary of State was entitled to recoup certain social security benefits paid to the plaintiffs.

The plaintiffs were unemployed and receiving unemployment benefit and income support when they suffered injuries in road traffic accidents. They then received post-accident benefits of the same amount as before but on the basis that they were exempted from being available for work. They settled their personal injury actions, making no claim for loss of earnings as they would have been unable to find work even if fit.

The Secretary of State recouped their post accidents benefits from their damages for pain, suffering and loss of amenity paid by the compensator.

The social security commissioner decided that the recoupment was authorised by section 22 of Schedule 4 to the Social Security Act 1989, as amended by the Social Security Administration Act 1992.

Gary Burrell (Alan Farnell & Co, Rotherham; Clarke Willmott & Clarke, Yeovil) for the plaintiffs; Philip Vallance QC and Margaret Bowron (DSS) for the Secretary of State.

LORD JUSTICE HENRY said that, until the 1989 Act, the benefits would not have been deducted from damages for pain, suffering and loss of amenity, but the relevance of the old law was limited by the fact that the new statutory scheme represented a complete and radical change.

The scheme bit on any "compensation payment" which was widely defined. The compensator should not make such a payment to a victim until the Secretary of State had furnished a certificate of total benefit paid to the victim in the respect of the accident and that sum was deducted from the payment and paid to the Secretary of State.

The question here was whether the benefits recouped were paid otherwise than in consequence of the accidents.

The fundamental difference between the new statutory scheme and its predecessor was that the State no longer subsidised the compensator.

Under the old scheme social security payments benefited the person at fault by reducing his liability to the victim. The recoupment of benefit was to be made from the whole compensation payment and was not limited to one component, such as loss of earnings.

The post-accidents benefits were paid on the strength of medical certificates. The post-accident benefits recouped were not "benefits paid otherwise than in consequence of the accident": they were clearly paid as a direct consequence of the accident.

Although both claimants received income support, a "topping up" benefit determined in relation to his family, the recouped benefit was not limited to victim's portion of benefit.

The unfairness to the plaintiffs stemmed from the failure to claim in the original actions special damages in respect of what the plaintiffs under the new statutory scheme lost financially as a result of the accident.

On the assumption that they would have been unemployed over their whole recuperation period (that is the period during which they were in receipt of recoupable benefits) what they lost was their entitlement to non-recoupable benefits over that period, that is benefits payable otherwise than in consequence of the accident.

The physical injuries rendered the victim unfit for work. The pecuniary loss to him consequent on those injuries was not loss of earnings (because he would not have been able to find a job), but the loss of non-recoupable benefits, which ceased to be paid as a result of the accident because his injuries rendered him no longer available for work, and so his non-recoupable benefits were replaced by benefits recoupable because they were paid in consequence of the accident.

If there was no question of overcompensation, recoupment of benefit should equally not leave the plaintiff undercompensated.

The plaintiffs were undercompensated, but that resulted not from the statutory scheme, but from the fact that no pecuniary loss claim had been made for loss of non-recoupable benefits.

On the facts postulated, the loss of non-recoupable benefit could be claimed as damages.

Lord Justice Nourse and Mr Justice Potts agreed.