Wadey v Surrey County Council (Wisely v John Fulton (Plumbers) Ltd)

Where listed social security benefits must be disregarded when damages for personal injury are assessed, they must also be disregarded when interest on those damages is calculated. Interest on past loss is therefore calculated on the gross damages before the compensator deducts recoverable benefits.

The court’s assessment of damages and interest is distinct from the statutory machinery governing recovery of benefits. That machinery operates when the compensation award is discharged. The omission from the Social Security (Recovery of Benefits) Act 1997 of the former provision requiring benefits to be deducted for interest purposes permits the statutory disregard to operate according to its natural effect.

These conjoined appeals arose from personal injury awards in Scotland and England. Each claimant recovered damages for past earnings calculated without deducting listed social security benefits. The issue was whether those benefits should nevertheless be deducted from the sum carrying pre-judgment interest.

In Wisely, the First Division of the Court of Session, reported at 1998 S.C. 910, held that interest should be calculated without deducting benefits. In Wadey, the Court of Appeal, reported at [1999] 1 W.L.R. 1614, followed Wisely and allowed the claimant’s cross-appeal from the county court. The common question was whether section 17 of the Social Security (Recovery of Benefits) Act 1997 required listed benefits to be disregarded when interest was calculated.

1. Both appeals dismissed unanimously. Lord Hope and Lord Clyde delivered the principal speeches. Lord Millett gave additional concurring reasons. Lord Slynn and Lord Woolf agreed that both appeals should be dismissed for the reasons given in those speeches.

2. Per Lord Hope and Lord Clyde, section 17 of the Social Security (Recovery of Benefits) Act 1997 requires listed benefits to be disregarded when damages are assessed. Its effect extends to the calculation of interest on those damages. The court must therefore treat gross past earnings and the other relevant heads of past loss as the claimant’s loss, without deducting listed benefits before calculating interest.

3. The statutory scheme separates the judicial assessment of compensation from the later recoupment machinery. The court first determines the compensator’s liability. The compensator subsequently deducts recoverable benefits when discharging that liability and pays the corresponding amount to the Secretary of State. Reviews and appeals concerning certificates occur after the compensation claim has been finally disposed of, and the legislation makes no provision for recalculating the court’s interest award following a revised certificate.

4. The former section 103 of the Social Security Administration Act 1992 expressly required the damages award to be treated as reduced by recoverable benefits when interest was assessed. Parliament repealed that provision without reproducing its first part in the 1997 Act. Its omission allowed section 17 to have its natural effect. Benefits disregarded in assessing damages likewise remain irrelevant when interest is calculated.

5. Lord Millett reasoned additionally that listed benefits do not diminish the claimant’s loss because they are repayable to the Secretary of State at the claimant’s expense. They resemble interest-free, non-recourse advances against damages. The fact that the Secretary of State accepts repayment without interest benefits the claimant and does not reduce the wrongdoer’s liability.

1. House of Lords: Dismissed both appeals unanimously and affirmed the Scottish and English appellate decisions.

2. First Division of the Court of Session: In Wisely, 1998 S.C. 910, held that interest on past earnings should be calculated without deducting listed benefits. It approved Spence v Wilson and overruled George v George C. Peebles & Son.

3. Court of Appeal, Civil Division: In Wadey, [1999] 1 W.L.R. 1614, followed Wisely and allowed the claimant’s cross-appeal concerning interest. The defendants’ appeal on liability had been compromised.

4. First instance: The Lord Ordinary reported the issue in Wisely to the Inner House before making the award. In Wadey, Wandsworth County Court deducted the benefits when calculating interest on special damages.