Case No: CCRTF 99/0477/2
 
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SWANSEA COUNTY COURT
(HH Judge Diehl QC)
Royal Courts of Justice
Strand, London, WC2A 2LL

Wednesday 29th March 2000

B e f o r e :

LORD JUSTICE THORPE
and 
LORD JUSTICE BROOKE
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	rOYSTON FREDERICK WILLIAMS
		Claimant/
Respondent	
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	BOC GASES Ltd	Defendants/ Appellants

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
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Barry P Cotter (instructed by Palser Grossman Swansea for the Appellants)
David Harris (instructed by Leo Abse & Cohen Cardiff for the Respondent)
Ms R Tuck	(instructed by both parties) attended to revise th judgment
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Judgment
As Approved by the Court

Crown Copyright ©

Lord Justice Brooke:
1.	This is an appeal by the defendants BOC Gases Ltd against a judgment of Judge Diehl QC at Swansea County Court on 19th April 1999 at the trial of a personal injuries action when he held that a sum of £11,889.10, which was paid by the defendants to the claimant Royston Frederick Williams on the termination of his employment, should not be set off so  as to extinguish any liability on their part to compensate him for his personal injuries.  Liability had been conceded and the damages had been agreed at £3,000, inclusive of interest, subject to the resolution of the issue relating to the set off.  Judgment was therefore entered for the claimant for £3,000.

2.	The claimant was employed by the defendants between about 1988 and 30th April 1996 as a goods vehicle driver.  On 25th March 1996 they wrote to him in these terms:

	"Further to recent discussions we now write to confirm that the group medical adviser has informed us that you are unfit to carry out your duties of LGV driver, and as there is no suitable alternative work available your employment will be terminated on 30th April 1996 on medical grounds.

	We are intending to make you a payment of £15,132.25, which under existing legislation may be paid tax-free.  Included in this figure is an amount of £3,243.15, which represents nine weeks pay in lieu of notice.  The balance of £11,889.10 is an amount to which there is no contractual entitlement and as such is to be treated as an advance against damages that may be awarded to you in respect of any claim you may have against the company."

3.	The judge was told that this payment of £11,889.10 came from the defendant’s own fund, and not from any third party or from any insurance scheme.  It was a matter for the employers’ discretion whether such a payment was made to an employee leaving their employment.  There was no contractual obligation to pay.  The sum was calculated in some way by reference to the length of his employment and no doubt also by reference to his level of earnings.

4.	The claimant’s unfitness for his duties had been determined on the basis of a range of symptoms from which he was then suffering.  These included a bad back and a congenital condition of his hip, which he regarded as the most serious of his complaints.  At the time the letter of 25th March 1996 was written he had not made, or indeed intimated that he would be making, the claim against the defendants which he made in these proceedings.

5.	The summons in this action was issued on 12th June 1997.  The claimant claimed damages, limited to £5,000, on the grounds that the working practices of which he made complaint significantly aggravated his pre-existing back condition.  He had to manhandle heavy cylinders onto pallets and also to manoeuvre them manually when delivering them to customers from his lorry, and he relied on a number of allegations of negligence and breach of statutory duty in support of his claim.

6.	Before I set out the judge’s reasons for his ruling in favour of the claimant, I will say something about the background principles of law against which this case fell to be decided.

7.	In Parry v Cleaver [1970] AC 1 Lord Reid identified at p 13 the two classes of cases in which the law disregards sums which a plaintiff has received as a result of an accident but which he would not have received if there had been no accident.  He referred to the proceeds of insurance and to sums coming to the plaintiff by reason of benevolence.  He said that the common law had treated the matter as one depending on justice, reasonableness and public policy.

8.	Of the first of these two exceptions, Lord Reid said at p 14A-D that he knew of no better statement of the reason why benevolent payments should not be taken into account than that of Andrews CJ who said in Redpath v Belfast and County Down Railway [1947] NI 167, 170, that it would be startling to the subscribers to a distress fund if they were to be told that their contributions were really made for the benefit of the negligent railway company.  Andrews CJ added a comment to the effect that if this was the law, the inevitable consequence in the case of future disasters of a similar character would be that the springs of private charity would be found to be largely, if not entirely, dried up.  Lord Reid commented:

	"It would be revolting to the ordinary man’s sense of justice, and therefore contrary to public policy, that the sufferer should have his damages reduced so that he would gain nothing from the benevolence of his friends or relations or the public at large, and that the only gainer would be the wrongdoer.  We do not have to decide in this case whether these considerations also apply to public benevolence in the shape of various uncovenanted benefits from the welfare state, but it may be thought that Parliament did not intend them to be for the benefit of the wrongdoer."

9.	There appear to be two principles underlying Lord Reid’s approach: 

	(1)	That it is just, reasonable and in accordance with public policy to ignore gifts to the insured plaintiff resulting from the benevolence of others because it is wrong that the wrongdoer should be the beneficiary of such benevolence and because the deduction of such gifts from plaintiff’s compensation from the wrongdoer would discourage benevolent donors in future;

	(2)	That the intention of the donors in making their gifts was to benefit the injured plaintiff and not to relieve the wrongdoer.

10.	What Lord Reid said in Parry v Cleaver echoed the approach of Windeyer J in the High Court of Australia in National Insurance Co of New Zealand Ltd v Espagne CLR 569 at pp 599-600:

	"In assessing damages for personal injuries, benefits that a plaintiff has received or is to receive from any source other than the defendant are not to be regarded as mitigating his loss if ...(b) they were given or promised to him by way of bounty, to the intent that he should enjoy them in addition to and not in diminution of any claim for damages ...  The second description covers a variety of public charitable aid and some forms of relief given by the state as well as the produce of private benevolence.  In both cases the decisive question is, not whether the benefit was received in consequence of, or as a result of the injury, but what was its character; and that is determined in the one case by what under his contract the plaintiff had paid for, and in the other by the intent of the person conferring the benefit.  The test is by purpose rather than by cause."

11.	In Hussain v New Taplow Paper Mills Ltd [1987] 1 WLR 336, CA, a case which reached the House of Lords in relation to the deductibility of payments made by employers to an injured workman which the employers were able to recover from insurers, the Court of Appeal was also invited by the defendants to consider an alternative ground for deductibility which was based on public policy grounds.  Lloyd LJ, with whom Ralph Gibson LJ agreed, said of this alternative argument at p 350B-G:

	"Arguments based on public policy tend to be somewhat imprecise, even, at time, emotive.  The present case was no exception.  Why, said [counsel for the plaintiff[, should third party tortfeasors reap the benefit of a scheme which was intended, not for their benefit, but for the benefit of the employee?  Why should a wrongdoer pay less than he would otherwise pay, or even nothing at all, when it is his victim who has earned the benefit by his labour?  I do not find such arguments on either side of much assistance.  But there is one consideration of public policy which is worth mentioning,  If an employee is injured in the course of his employment, and his employers make him an immediate ex gratia payment, as any good employer might, I see no reason why such a payment should not be take into account in reduction of any damages for which the employer may ultimately be held liable.  Employers should be encouraged to make ex gratia payments in such circumstances.  If so, then public policy would seem to require that such payments be brought into account.

	It could, of course, be said that an ex gratia payment is like a sum coming to the plaintiff by way of benevolence, and should therefore be disregarded.  This is so, where it is a third party who is ultimately held liable: see Cunningham v Harrison [1973] QB 942.  But there must surely be an exception to that general rule where the ex gratia payment comes from the tortfeasor himself.  So, if it is right that an ex gratia payment by the employer should be brought into account where the employer is the tortfeasor, why should it make any difference that the payment is one which he has contracted to make in advance?  So if [counsel for the defendants] is wrong in his main argument, that payments under the scheme are in the nature of wages, and should be brought into account on that score, there would be much to be said for his alternative argument that such payments should in any event be brought into account on the grounds of ‘justice, reasonableness and public policy’.  But it is unnecessary to decide the case on that ground, since, on the facts of the present case, [counsel] is entitled to succeed on his first ground."

12.	When the plaintiff appealed to the House of Lords [1988] 1 AC 514, it is clear from a passage at the end of Lord Bridge’s speech (with which the other four members of the House agreed) that he shared Lloyd LJ’s approach, even if he did not expressly refer to it in his judgment.

13.	In the main body of his speech Lord Bridge, making a shift of emphasis from the approach adopted by Lord Reid in Parry v Cleaver (1970) AC 1, 13, said at p 527E that prima facie plaintiffs were only entitled to recover their net loss.  Financial gains accruing to them which they would not have received but for the event which constituted their cause of action were prima facie to be taken into account in mitigation of the losses which that event caused to them.

14.	When Lord Bridge came to consider the “two well-established exceptions”, he described the second exception at p 527G as arising “when the plaintiff receives money from the benevolence of third parties prompted by sympathy for his misfortune”.  He said that in both cases the common sense of the exceptions stared one in the face:	

	"It may be summed up by the rhetorical question: ‘Why should the tortfeasor derive any benefit, in the one case, from the premiums which the plaintiff has paid to insure himself against some contingency, however caused, in the other case, from the money provided by the third party with the sole intention of benefiting the injured plaintiff?’"

15.	Lord Bridge went on to acknowledge the existence of a variety of borderline situations where there might be no obvious answer to the question whether the rule against double recovery or some principle derived by analogy from one of the two classic exceptions to that rule should prevail.  For the resolution of these cases he reiterated what Lord Reid said in Parry v Cleaver about the common law treating the matter as one depending on justice, reasonableness and public policy.

16.	At the end of his judgment Lord Bridge made it clear at p 531G - 532D that he did not agree with a decision of the British Columbia Court of Appeal in Chan v Butcher [1984] 4 WWR 363 which had ruled that a plaintiff was not liable to give credit for payments by way of her full salary in accordance with the terms of her contract of employment in pursuance of a “short term disability program” established and funded by her employer.  The Canadian Court had been influenced by the consideration that the benefits were intended to insure the employee against the risk of unemployment caused by illness or accident, and not for the advantage of the wrongdoer who caused the employee to become unemployable.  From the point of view of justice, reasonableness and public policy, Lord Bridge said at p 532C-D:

	"It positively offends my sense of justice that a plaintiff, who has certainly paid no insurance premiums as such, should receive full wages during a period of incapacity from two different sources, his employer and the tortfeasor.  It would seem to me still more unjust and anomalous where, as here, the employer and the tortfeasor are one and the same."

17.	It appears to me that the effect of the decision in Hussain, both in the Court of Appeal and in the House of Lords, is to endorse the two principles identified by Lord Reid in Parry v Cleaver, and to add the following glosses:

	(1)	The starting point is the plaintiff’s net loss;

	(2)	Gifts accruing from the benevolence of people other than the tortfeasor are then to be credited to the plaintiff when calculating the amount of compensation payable by the tortfeasor: payments accruing from the benevolence of the tortfeasor himself do not fall within this exception.

18.	Lord Bridge repeated the first of these glosses in even more emphatic terms in Hodgson v Trapp [1989] 1 AC 807, 819E-H.  He restated the basic rule that it was the net consequential loss and expense which the court must measure, while accepting that there were “certain well-established, though not always precisely defined and delineated, exceptions”.  He added at p 819G:

	"But the courts are, I think, sometimes in danger, in seeking to explore the rationale of the exceptions, of forgetting that they are exceptions.  It is the rule which is fundamental and axiomatic and the exceptions to it which are only to be admitted on ground which clearly justify their treatment as such."

19.	In Hodgson v Trapp the House of Lords broke away from the idea, suggested by Lord Reid in Parry v Cleaver, that it was useful, when considering issues relating to the deductibility of statutory benefits, to inquire into Parliament’s intentions when making them available at the taxpayers’ expense.  Instead, they held on grounds of public policy that attendance and mobility allowances should be regarded as being available to meet the cost of the plaintiff’s care following her injury so as to preclude the possibility of double recovery (see Lord Bridge at p 823A-F).

20.	I turn, finally, to what commentators have called “the difficult case” of McCamley v Cammell Laird Shipbuilders Ltd [1990] 1 WLR 963: for this description, see McGregor on Damages (16th Edition, 1997) at para 1626 and the Law Commission, Damages for Personal Injury: Medical, Nursing and Other Expenses; Collateral Benefits (1999) Law Com No 262, pp 106-7.

21.	Mr McCamley suffered serious personal injuries during the course of his employment.  He received £46,630 under an insurance policy taken out on behalf of the defendant employers by their parent company for the benefit of employees who were injured at work.  Giving the judgment of this court (prepared jointly by Croom-Johnson LJ and himself) O’Connor LJ described the details of the scheme at pp 968A - 969A.  Money was payable under the policy if a person insured under the scheme suffered accidental bodily injury which independently of any other cause resulted within 24 months in death, disablement, or the incurring of medical expenses.  O’Connor LJ commented that the compensation payable under the policy, whose existence was unknown to both the plaintiff and is trade union, followed the ordinary pattern of an accidental injury insurance policy.  When the plaintiff’s accident occurred, the insurers paid the sum of £46,630 to the defendants, who paid it to the plaintiff’s solicitors, indicating that it ought to be credited to the eventual award of damages.  The plaintiff’s solicitors accepted it not on those terms, but on the understanding that the judge would have to decide the point.

22.	At p 969B-D O’Connor LJ identified four features of the policy.  First, that it was an ordinary personal accident policy whereby payment of the sums insured was independent of any fault by anybody.  Secondly, although the different sections of the policy differentiated between what the various employees were earning, an employee got the benefit of the policy even though he had only been in the relevant employment for a short while.  Thirdly, the benefit under the policy was always paid as a lump sum: it was not paid in substitution for loss of wages resulting from the accident, and fourthly, the plaintiff made no contribution of any kind to the policy or its premiums.

23.	In upholding the judge’s description that the policy payment should not be deducted because it was received from an act of benevolence, O’Connor LJ said at p 971D-H:

	"The reason why the judge came to the correct decision on this matter is that the payment to the plaintiff was a payment by way of benevolence, even though the mechanics required the use of an insurance policy.  The payment was not an ex gratia act where the accident had already happened, but the whole idea of the policy, covering all the many employees of British Shipbuilders and its subsidiary companies, was clearly to make the benefit payable as an act of benevolence whenever a qualifying injury took place.  It was a lump sum payable regardless of fault or whether the employers or anyone else were liable, and it was not a method of advancing sick pay covered by a contractual scheme such as existed in Hussain’s case [1988] AC 514.  It was paid in circumstances quite different from those covered by Lloyd LJ’s comment on public policy: [1987] 1 WLR 336, 350.  That the arrangement was made before the accident is immaterial.  The act of benevolence was to happen contingently on an event and was prepared for in advance.  To refer to Lord Bridge’s speech in Hussain’s case [1988] AC 514, 528, this payment was one analogous to “one of the two classic exceptions” to the rule that there should be no double recovery.  The point was well made on behalf of the plaintiff that this sum was not to be payable in respect of any particular head of damage suffered by him and was not an advance in respect of anything at all.  To say that does not mean that in an appropriate case there may not be a general payment or an advance to cover a number of different heads of damage.  The importance in the present case is that the sum was quantified before there had been an accident at all and when it could not have been foreseen what damages might be sustained when one did take place."

24.	In the judgment under appeal Judge Diehl QC said that he found this passage to be helpful.  He bore in mind, however, that this case was not on all fours with McCamley’s case in the sense that Mr Williams had sustained the relevant injury over a period of time, and certainly before the letter of 25th March 1996 was written.

25.	The judge directed himself, correctly, that it was for the claimant to establish an exception to the general rule of deduction.  He went on to find that he was satisfied on the balance of probabilities that the payment did not fall within the general rule.  He gave his reasons in these terms:

	"It was not a payment made referable to an anticipated or intimated claim, and was an ex gratia payment made on termination of the plaintiff’s employment on medical grounds, and I quote those words “medical grounds” from the letter itself.  It does not come within the principles stated, in my judgment, by the Court of Appeal in Hussain as an ex gratia payment referable to an injury at work for which the plaintiff might make a claim.

	With regard to McCamley, by a parity of reasoning here there appears to have been a policy to make a discretionary payment to an employee whose employment terminated on medical grounds, regardless of what that ground was or the cause, or claimed cause, of it.  There is, in my judgment, force in the submission that this payment was clearly not conditional upon a claim being made against the company.  The last sentence of that second paragraph of the letter does not restrict the basis upon which the payment is made.  If it did, then there would be substance in the defendant’s argument, but it plainly does not.  By way of simple example (others were mentioned in argument), the sum was not repayable if in the event, whether within the stated period or whatever time the defendant considered appropriate, no claim against the employer later materialised.

	Whether that sentence was deliberately inserted or not it can be said, with some force in my view, that it had the effect of an attempt or device to give comfort to the defendants in the event of a later claim, and/or to discourage any such claim, but was not so restricted, and in those circumstances in my judgment there should be no deduction."

26.	In my judgment, the judge was over-influenced by the decision of this court in McCamley which should be treated, until it receives the consideration of the House of Lords, as a case turning on its own particular facts: in other words, for what the members of that court, deciding the issue as a jury question, thought was just, reasonable and in accordance with public policy on the facts of that case.

27.	Since the decision in McCamley, Lord Bridge has restated the principles which militate against double recovery from a tortfeasor in Hunt v Severs [1994] 2 AC 350 at p 357H, a decision to which the judge was not referred:

	"The starting point for any inquiry into the measure of damages which an injured plaintiff is entitled to recover is the recognition that damages in the tort of negligence are purely compensatory.  He should recover from the tortfeasor no more and no less than he has lost.  Difficult questions may arise when the plaintiff’s injuries attract benefits from third parties."

28.	Lord Bridge then referred again to the two well-established categories of receipt which are to be ignored in assessing damages, and again identified the second as “the fruits of benevolence of third parties motivated by sympathy for the plaintiff’s misfortune”.  After referring to the policy considerations which underlay these two apparent exceptions to the rule against double recovery, Lord Bridge said:

	"But I find it difficult to see what considerations of public policy can justify a requirement that the tortfeasor himself should compensate the plaintiff twice over for the self-same loss."

29.	Mr Harris argued that we ought not to interpret the payment made by the employers in this case as referable to compensation (however calculated) for personal injuries.  He said that when they wrote that the balance of £11,889.10 was to be treated as an advance against any damages that might be awarded to Mr Williams in respect of any claim he might have against them, the employers might just as easily have been referring to claims he might have under employment legislation.

30.	He was unable, however, to identify what claims under employment law might be available to someone whose services were terminated when he was no longer able to work on medical grounds, and in any event the use of the word “damages” refers much more naturally to an award of common law damages for personal injuries (for negligence or breach of statutory duty) than to an award of statutory compensation under employment law.

31.	Mr Harris then argued that this sum was paid to his client whether or not he had a good claim for damages against his employers and that its amount was calculated in accordance with a formula which bore no relation to any formula appropriate for compensating him for loss arising from injuries caused by actionable negligence.

32.	In my judgment, these arguments are not strong enough to resist the force of the principles reiterated by Lord Bridge in his three speeches in the House of Lords to which I have referred.  The “benevolence” exception is limited in terms to gifts arising from the benevolence of third parties, and does not cover benevolent gifts made by the wrongdoer himself, for which allowance ought prima facie to be made against any compensation he might have to pay.  Neither of the justifications for the benevolence exception apply to the tortfeasor.  Deductibility will encourage him to make benevolent payments in future to injured employees, rather than the reverse.  And it certainly cannot be said that in making the gift, his intention was to benefit the plaintiff rather than to relieve himself of liability pro tanto: he would have been happy to achieve both purposes at once.  A fortiori in a case in which he said in terms, at the time he made the gift, that it was to be treated as an advance against any damages he might have to pay.

33.	I can see nothing unjust in the fact that on this approach Mr Williams will not be able to recover more money from his employers because he can prove that some of the ailments from which he was suffering when he retired on medical grounds were caused by his employers’ negligence.  As a matter of public policy employers ought to be encouraged to make payments of this kind to their employees who retire on medical grounds, and there is no principle of public policy known to me which should tend to encourage employees to sue their employers if they have already received sums attributable to their injuries which exceed what their employers might otherwise be liable to pay.

34.	The editor of J Fleming, The Law of Torts (8th Edition) said at p 249:

	"The case for crediting the tortfeasor for benefits with which he has himself furnished the plaintiff is perhaps strongest: here there is no room for the argument that it would subsidise the tortfeasor at someone else’s expense; moreover, it encourages voluntary aid by those who are often in the best position to offer it to their victims when it is most needed."

35.	I agree.

36.	For these reasons I would allow this appeal, set aside the judge’s order and direct that judgment be entered for the defendants.

Lord Justice Thorpe:	I agree.

Order:  Order by consent:-
1.	The Defendants appeal to be allowed and the judge’s order of 19 April 1999 to be set aside and judgment be entered for the defendants.
2.	The Defendants to pay the Claimant’s costs on Scale 1 to 14 April 1999.
3.	The Claimant to pay the Defendants costs, to include the costs of appeal, from 15 April 1999, such costs to be subject to a detailed assessment in default of the agreement.
(Order does not form part of the Approved Judgment)