McCaffery v Datta & Ors

Where a defendant pays £2,500 or less into court, the payment is exempt under the Social Security Administration Act 1992. It is not equivalent to a payment covering statutory benefits merely because any judgment must be paid to the Compensation Recovery Unit. If the claimant obtains judgment exceeding the payment, the claimant is the successful party for costs. A defendant expecting recovery no greater than certified benefits must use a Calderbank offer specifying the sum to be paid to the Unit. A defendant expecting damages above the benefits amount should use the prescribed payment-into-court procedure. The two devices cannot be combined to obtain costs protection.

This was an appeal against a costs order made after a personal injury claim. The claimant obtained judgment for £33,560, reduced by one third for contributory negligence to £22,373.33. The defendants had paid £2,500 into court. The Compensation Recovery Unit had certified benefits of £25,419.26, and the defendants argued that the claimant would receive nothing personally because the judgment had to be paid to the Unit.

The deputy High Court judge therefore treated the payment as akin to a payment of the certified benefits and ordered the claimant to bear costs from the date of payment. The central issue was whether the claimant remained the successful party, and whether the defendants could rely on the payment into court for costs despite its statutory treatment as an exempt payment.

Appeal allowed unanimously. Lord Justice Stuart-Smith delivered the leading judgment, with Lord Justices Aldous and Ward agreeing. The costs order was varied so that the claimant recovered the costs of the action.

1. The payment of £2,500 was an exempt payment. Under the Social Security Administration Act 1992, the statutory recoupment scheme applied to compensation payments but not to exempt payments. The £2,500 threshold was prescribed for small payments. Accordingly, the payment was not equivalent to a payment into court of the £25,419.26 certified as repayable to the Compensation Recovery Unit.
2. Under Order 62, costs ordinarily followed the event, subject to the court’s discretion. The claimant had obtained judgment substantially exceeding the payment into court and was therefore the successful party. The fact that the judgment had to be satisfied by payment to the Compensation Recovery Unit was irrelevant. Payment to a third party could arise in the same way as in a subrogated claim or a claim for care provided by relatives.
3. [1984] 1 W.L.R. 394 was distinguishable. It concerned nominal damages and no payment into court. It did not justify treating the defendants as successful where they remained liable for substantial damages.
4. A defendant who considers that the claimant will recover no more than the certified benefits cannot protect costs by paying that amount into court. The proper course is a Calderbank offer of a specified sum, not exceeding the certified amount, stating that acceptance will result in payment to the Compensation Recovery Unit. If the defendant expects damages to exceed the benefits, the defendant should use the prescribed payment-in-court form, even where the expected excess is £2,500 or less.
5. A payment into court cannot be combined with a Calderbank offer in the alternative for costs protection. The payment is made in satisfaction of the claimant’s cause of action, even though part of the satisfaction involves payment to a third party. If the payment is not accepted and judgment exceeds it, the claimant should recover costs.

• Court of Appeal (Civil Division): [1996] EWCA Civ 1179; appeal allowed and the costs order varied so that the claimant recovered the costs of the action.
• High Court of Justice, Queen’s Bench Division: A deputy judge found for the claimant, assessed damages at £33,560, reduced them for contributory negligence, and ordered the claimant to pay costs from the date of the £2,500 payment into court.