Longden v. British Coal Corporation

The House of Lords considered the correct treatment of a collateral incapacity pension in assessing damages for personal injury, distinguishing the rules applicable to loss of earnings before normal retirement age and loss of pension after normal retirement age. Following Parry v. Cleaver and Smoker v. London Fire and Civil Defence Authority, incapacity pensions are ignored in calculating loss of earnings up to normal retirement age but receipts of incapacity pension after the normal retirement age must be set off against retirement pension loss for that same period. The Lords rejected the defendant's submission that all incapacity pension payments received before the normal retirement age must be capitalised and set off against pension loss after retirement age. They held, however, that the lump-sum commutation paid on incapacity retirement should be apportioned and that the portion representing commutation of post-retirement income should be set off against the claimant's claim for pension loss.

The claimant was injured at work and accepted incapacity retirement under his employer's contributory superannuation scheme, receiving a lump sum and an annual incapacity pension. He sued for damages, including loss of pension that he would have received after his normal retirement age. At first instance Douglas Brown J awarded pension loss; the Court of Appeal ([1995] I.C.R. 957) dismissed the defendants' appeal but corrected an arithmetical error. The defendants appealed to the House of Lords.

Nature of the claim: damages for personal injury, including past and future loss of earnings and future loss of retirement pension (lump sum and annual pension) after normal retirement age.

Issues framed:

• whether the total of all incapacity pension payments received up to the normal retirement age must be brought into account (capitalised or otherwise) and set off against the claimant's loss of retirement pension after normal retirement age;
• if not, whether the lump sum paid on incapacity retirement should be apportioned between pre- and post-retirement periods and the post-retirement portion set off against the claimant's pension loss.

Court's reasoning and conclusion: the Lords applied authorities such as Parry v. Cleaver and Smoker v. London Fire and Civil Defence Authority to emphasise the need to compare like with like. Incapacity pensions are of a different character from wages and must be ignored in assessing wage loss before retirement age; after retirement age, however, incapacity pension receipts of the same character must be set off against retirement pension loss for the same period. It was therefore impermissible to capitalise and set off the whole of pre-retirement incapacity payments against post-retirement pension loss. The lump sum, being a commutation of part of the annual pension, however, does affect post-retirement annual payments and should be apportioned; an appropriate apportionment (using standard actuarial multipliers) produced a deductible figure of £1,630, reducing the assessed pension loss accordingly and leading to a modest reduction in the total award.

The House of Lords allowed the appeal in part, reducing the pension-loss component to reflect the apportioned deduction of the lump sum and adjusting the total award.

Appeal allowed in part. The House of Lords held that (1) the defendant could not capitalise and set off all incapacity pension payments received before the normal retirement age against the claimant's loss of retirement pension after that age because incapacity pensions are to be disregarded for pre-retirement loss of earnings and only comparable pension receipts are to be set off against pension loss in the same period; and (2) the lump-sum commutation received on incapacity retirement should be apportioned so that the portion attributable to the post-retirement period is set off against the claimant's pension loss. Applying an apportionment reduced the pension-loss award from £26,570 to £24,940 and the total award accordingly.

Judgment at first instance: Douglas Brown J (trial). Court of Appeal (McCowan, Roch and Ward LJJ) dismissed defendants' appeal, reported [1995] I.C.R. 957. Appeal to House of Lords allowed in part ([1997] UKHL 52).