Pirelli General Plc v Gaca

Damages for negligence compensate the claimant’s net loss. Payments received because of the injury are prima facie deductible unless a clearly justified exception applies.

The benevolence exception ordinarily covers payments made by third parties from sympathy. It does not normally cover an employer-tortfeasor’s ex gratia payments, even if motivated by benevolence. The insurance exception applies only where the claimant paid or contributed, directly or indirectly, to the premium. Employment and the provision of labour alone do not establish such a contribution.

Deductibility is not a broad jury question governed only by an individual assessment of justice, reasonableness and public policy. An analogy with a recognised exception must be clearly established.

The claimant suffered serious injuries while employed by the defendants. Liability was admitted. While unable to work, he received temporary-disablement payments under a group personal accident policy arranged and funded by his employers. After his employment ended, he received a further permanent-disablement payment and an ill-health gratuity.

On a preliminary issue, the recorder held that the insurance payments were not deductible from damages. The employers appealed. The claimant relied on both the benevolence and insurance exceptions to the rule against double recovery.

The central questions were whether McCamley v Cammell Laird Shipbuilders Ltd [1990] 1 WLR 963 should continue to be followed, and whether employer-funded insurance benefits were deductible when the employee had neither paid nor proved an indirect contribution to the premium.

1. Appeal allowed. The insurance payments were deductible from the damages. Neither the benevolence exception nor the insurance exception applied. Dyson LJ delivered the leading judgment. Mummery and Brooke LJJ agreed.

2. The fundamental rule is that damages compensate the claimant’s net consequential loss. Financial gains which would not have accrued but for the actionable event are prima facie brought into account. The two established exceptions concern third-party benevolence and insurance for which the claimant has provided consideration.

3. The benevolence exception ordinarily concerns charitable payments made by third parties from sympathy for the claimant’s misfortune. An ex gratia payment by the tortfeasor does not normally fall within that exception, even if benevolent motives can be shown. Deduction prevents double compensation and encourages employers to assist injured employees promptly. A different conclusion might be possible if a tortfeasor expressly made a gift on the stated basis that it should not reduce any later damages.

4. McCamley v Cammell Laird Shipbuilders Ltd [1990] 1 WLR 963 was wrongly decided and should no longer be followed. Employer-funded accident benefits are not analogous to charitable payments by sympathetic third parties. Deductibility is not a broad jury question to be resolved solely by an individual view of justice, reasonableness and public policy. Any proposed extension by analogy to a recognised exception must be clearly justified.

5. Alternatively, McCamley was distinguishable. Its employee and union did not know of the policy. Here the claimant knew that the policy formed part of the benefits available under the employment package, giving him at least a reasonable expectation of payment.

6. The insurance exception requires the claimant to have borne the premium wholly or partly. Contribution may be direct or indirect, but it requires evidence of consideration given up for the benefit, such as reduced remuneration. The mere fact that an employee’s labour helped the employer fund the policy is insufficient. No evidence showed that this claimant paid or contributed to the premium.

1. Court of Appeal (Civil Division): The employers’ appeal was allowed. The insurance payments were deductible from the claimant’s damages.

2. Southampton County Court: Mr Recorder Gibbons QC determined a preliminary issue in the claimant’s favour on 29 August 2003, holding that the insurance payments were not deductible.