|Judgments - Cantwell v. Criminal Injuries Compensation Board (Scotland)
27. I think that it is clear from this passage that Lord Reid's answers to the two question which he had identified at p 13 would have been, first, that what the plaintiff lost as a result of the accident was the diminution in the ultimate product of the insurance scheme and, secondly, that the question whether he had received something else which he would not have received if there had been no accident did not arise. As Oliver LJ said in Auty v National Coal Board  1 WLR 784, 807H, the conclusion which is to be drawn from this passage in Lord Reid's speech is that, to the extent of the ill-health pension payable after retirement age, the plaintiff had suffered no loss.
28. Lord Pearce said at p 33C-D:
Lord Wilberforce also said at p 42F-G that he saw no inconsistency in treating these two periods differently. He said that they gave rise to two quite different equations, and that the difficult legal questions which related to the earlier period did not arise in relation to the latter, where all that was needed was an arithmetical calculation of pension loss.
29. Your Lordships were not referred to any Scottish case prior to the 1982 Act in which consideration had been given to the question credit had to be given, in the assessment of a pursuer's claim for the loss of a retirement pension, for an ill-health or disability pension to which the pursuer became entitled under the same scheme as a result of the accident. But I do not think that it can be doubted that the same result would have been reached as that which was achieved by agreement in Parry v Cleaver. The observations of their Lordships on that part of the plaintiff's claim were, of course, obiter. But they would have been treated with great respect in Scotland, as the principles upon which they were based are entirely consistent with the principle of Scots law that damages are intended to be compensatory. In Wilson v National Coal Board 1981 SC (HL) 9 the speeches in Parry v Cleaver were referred to as useful guides to the position in Scotland: per the Lord President (Emslie) at pp 14-15, Lord Keith of Kinkel at p 21. The point could have been made with equal force in Scotland that in essence the claim was one for diminution of pension as both the retirement pension and the ill-health pension were products of the same scheme, that the calculation to establish the amount of the loss required like to be compared with like and that it was in the end simply a matter of arithmetic.
Section 10 of the 1982 Act
30. The question is whether the words used in section 10 preclude the approach to this issue which was approved in Parry v Cleaver  AC 1 and which, there is every reason to think, would have been adopted in Scotland if the statute had not intervened to produce what has been held by the First Division to produce the opposite result.
31. The first part of section 10 contains a list of payments and benefits which are not be taken into account so as to reduce the amount of damages to the injured person. I shall call this, for short, "the prohibition". The second part contains a list of payments and benefits which are to be taken into account. I shall call this "the direction". Mr Campbell conceded that the respondent's ill-health pension is a contractual pension within the meaning of section 10(a). So it is common ground that it is caught by the prohibition in the first part of the section. But the extent of the prohibition nevertheless requires to be analysed, as also does the extent of the direction in the second part. This turns upon what is meant by the words "taken into account" in assessing the amount of damages.
32. It should be noted that these two lists have one thing in common. The items in each list are of the kind that requires a decision on grounds of policy as to whether or not they should be taken into account in the assessment. This because their common characteristic is that they may be thought to be receipts of a different kind from the loss claimed or relate to a different period. The issue to which both lists appear to be directed is the possible mitigation of a loss which has been suffered by the injured party. The words "so as to reduce that amount" indicate that the lists only arise for consideration once the amount of the loss claimed has been identified.
33. There are however two possible meanings that can be given to the phrase "that amount". One is that the exercise refers to the total amount claimed, so that both the prohibition and the direction must be applied to the total amount without regard to the nature of the various heads of the claim. The other is that regard must be had to the nature of each head of loss or damage, and that the prohibition and direction as the case may be is to be applied to each head only so far as it is relevant to the nature of the item of loss claimed.
34. The distinction between these two meanings can be demonstrated by assuming that the claim is in whole or in part a claim for solatium. Solatium is an amount awarded to the injured party for pain and suffering caused by the injury. It is an award for non-pecuniary loss. So it is assessed without regard to the amount of any sums lost or received after the accident by way of earnings, pension or other benefit. Taken literally it, the direction in section 10(i) that any remuneration or earnings from employment shall be taken into account in assessing "the amount of damages" payable to the injured person would appear to require remuneration or earnings from employment after the accident to be brought into account by way of deduction in the assessment of solatium. But to do this would require a pecuniary gain to be set off against a loss that is not pecuniary. It is hard to believe that such a surprising result was intended by Parliament. In practice solatium continues to be assessed, as it always has been, as a self-contained head of damages without taking into account any remuneration or other payments lost or received since the accident. On the other hand section 10(iv) requires account to be taken of any payments of a benevolent character made directly to the injured person by the responsible person following on the injuries. Payments of this kind may be presumed to have been made as payments to account of damages. So there can be no objection on grounds of principle to setting off these payments against any amount to be awarded as solatium when assessing the amount of damages.
35. These examples show that the correct approach is to apply the prohibition or the direction in section 10, as the case may be, only in so far as the nature of the payment or benefit that is in issue is relevant to an assessment of the head of damages claimed. The first step is to identify the nature of the loss claimed and then to calculate the amount of that loss. Only when this has been done does the question arise as to whether or not the listed receipts should be taken into account so as to reduce that amount.
36. The prohibition in section 10(a) refers to "any contractual pension or benefit". Where the head of damages which is in issue is a claim for loss of earnings, the prohibition is plainly relevant to the calculation of the amount of the injured party's pecuniary loss for the relevant period. But what is to be done where the head of damages which is in issue is a claim for the loss of a contractual pension or benefit is met by evidence of the receipt of a pension, or a benefit of the same kind, under the same contract? The answer is to be found in the nature of the claim. In the situation which I have envisaged, the injured party's loss can only be measured by comparing the pension or benefit which has been lost with that which has been received. The measure of the loss is the difference between these two amounts, comparing like with like. There is no place for the prohibition in that calculation. The loss can only be measured by taking the contractual pension or benefit into account. Once that calculation has been completed there is no need of the prohibition. It is obvious that the contractual pension or benefit cannot be taken into account again at that stage. That would be open to the objection of double-counting.
37. In my opinion the report of the Scottish Law Commission supports this interpretation of section 10. It was proceeded by a consultation paper (Memorandum No 21, Damages for Personal Injuries: Deductions and Heads of Claim, 1 December 1975). Paragraph 4 of the consultation paper set out the background to the Commission's consideration of the question what benefits received by an injured person should be taken into account in assessing his claim for damages. The following sentence identifies the mischief which the Commission was seeking to address:
38. As Lord Coulsfield said at p 417F-G of his opinion in the present case, there is not a trace in the Commission's report of any reasoning which might support a departure from Lord Reid's argument in Parry v Cleaver  AC 1 that a comparison of an ill-health pension with a post-retirement pension is a comparison of like with like and therefore no deduction can properly be made in assessing post-retirement loss. Nor is there any argument which would justify a situation in which a pursuer could receive his ill-health pension, post-retirement in full and also compensation for what could only be regarded as a notional post-retirement loss. On the contrary, I would add, the report contains clear statements in the passages in paragraphs 5 and 47 to which I have already referred that the Commission's recommendations proceed upon a recognition of the general principle of Scots law of reparation that damages are intended to be compensatory. It is clear that the Commission did not intend to depart from the principle that the injured party should not be placed in a better position financially than he was before the accident.
39. There is no sign in the reported cases that section 10 of the 1982 Act has been regarded hitherto as giving rise to the difficulty which in their decision in the present case the learned judges of the First Division have identified. As S A Bennett, Setting Off on the Wrong Foot, 2000 SLT (News) 214, has pointed out, it seems rather to have been taken for granted that the provision did not fall to be applied to claims in respect of loss of pension rights. In Mitchell v Glenrothes Development Corporation, 1991 SLT 284, one of the heads of damages claimed was loss of pension rights. Lord Clyde assessed the amount to be paid under this head of claim by applying a multiplier to a multiplicand based on the current level of the pursuer's wage. At p 291B he said that one of the factors which he took into account was the possibility of another pension being forthcoming. He referred in the course of his discussion of this head of claim to the treatment of claims for loss pension rights in Parry v Cleaver  AC 1 and Auty v National Coal Board [1985 ] 1 WLR 784. There is no suggestion in his opinion that the treatment of claims of this kind in England was not a reliable guide to how they should be treated in Scotland. In Davidson v Upper Clyde Shipbuilders, 1990 SLT 329, 334L, Lord Milligan agreed with counsel for the pursuer's acceptance that the pursuer could make no claim for loss of pension rights for the period after which she would have become entitled to a widow's pension in her own right after her husband's death. He said that this was consistent with the decision in Auty's case and with the reasoning in Lord Reid's speech in Parry's case.
40. In Leebody v Liddle, 2000 SCCR 495, the pursuer's claim for damages also included a claim for loss of pension rights. The amount of the difference between the pension which the pursuer would have received under his employers' pension scheme had he retired at the age of 65 and the reduced pension which he would receive from the age of 65 under his actual retirement arrangements was agreed. The defenders' argument was that against any such reduction there had to be set the pension benefits received and to be received up to that birthday as well as the pension benefits to be received after that date. The pursuer's argument was that the effect of section 10(a) of the 1982 Act was to prevent a pension obtained on early retirement being brought into account so as to reduce loss of earnings. Lord Ordinary, Lord Macfadyen, was referred to Lord Milligan's opinion in the present case but not to the decision of the First Division. The present case was still at avizandum when the case before him was being argued. The First Division did not have the advantage of seeing Lord Macfayen's opinion as it was not delivered until after their decision in the present case had been issued.
41. At p 522E-523A Lord Macfadyen said:
42. I consider that this passage correctly sets out the approach which is to be taken to claims for loss of pension. The periods before and after the normal retirement age require to be considered separately. Prior to the retirement age the claim is for loss of earnings. Pension benefits received during that period cannot be set off against the claim for loss of earnings. The effect of section 10(a) of the 1982 Act was to make it clear that the decision to that effect in the English case of Parry v Cleaver  AC 1 applied also in Scotland. After the retirement date the claim is for loss of pension. In order to compare like with like, pension benefits received and to be received after that date must be brought into account. As this is the only way in which the amount of the compensation due for the loss of pension can be calculated, section 10(a) does not apply.
43. I would therefore hold that the law of Scotland requires the calculation of the respondent's claim for loss of his retirement pension to take his ill-health pension into account in the assessment of the amount which he has lost. It seems to me that this conclusion is inevitable on the facts of this case, as the two pensions are both products of the same scheme. It may be thought that the only reason why the issue has given rise to difficulty is the difference between the names which have been given to them by the Regulations. The correct view of the facts shows that the claim is simply one for the diminution in the amount of the pension to which the respondent is entitled under the Scheme. The amount by which his pension has been diminished cannot be calculated without setting the amount of the ill-health pension against the amount of the retirement pension.
Paragraph 20 of the Scheme
44. Paragraph 20 of the Criminal Injuries Compensation Scheme departs from the common law, because it states that where the victim is alive compensation will be reduced to take account of any pension accruing as a result of the injury. Where the pension is taxable, as it is in the present case, one-half of its value is to be deducted. The Board observed in its judgment in the present case that the policy followed by the Board has been to deduct half of any ill-health pension up to the date of occupational retirement and thereafter to deduct the net amount of the pension in full from the net amount of the pension otherwise payable. As I have already noted, there was a difference of view as to whether this policy was correct on a proper construction of paragraph 20. The minority view was that the deduction of one-half of the ill-health pension applied also to the post-retirement period.
45. It has to be said that paragraph 20 is less than explicit on this point. Mr Mitchell QC for the respondent did not invite your Lordships to endorse the view of the minority. For completeness however I should add that I agree with the judges of the First Division that the majority view was the correct one. The first sentence of paragraph 20 says that compensation will be "reduced" to take account of any pension accruing as a result of the injury. Although it does not say so in terms, it seems to me that this sentence must be directed to the period prior to the retirement date when the claim is for loss of earnings. It assumes that the necessary arithmetic has been done to calculate the amount of that loss. It then requires a reduction to be made from that amount, which is limited to one-half of the pension where it is taxable. But after the retirement date the claim is for loss of pension. The amount of the compensation for the pension loss cannot be calculated without bringing fully into account the whole of any pension accruing as a result of the injury. That calculation must be completed before any question can arise about reducing the compensation. In the absence of clear language to the contrary, paragraph 20 must be read as having no application to the question how a claim for loss of pension after the retirement date is to be calculated.
46. I would hold that the construction of section 10(a) which the First Division felt compelled to adopt was wrong and that the Lord Ordinary was right to refuse the respondent's application for judicial review. I would allow the appeal, recall the interlocutor of the First Division and restore the interlocutor of the Lord Ordinary.
LORD HOBHOUSE OF WOODBOROUGH
47. I too agree. The statutory provision relevant to the present case is s.10 of the Administration of Justice Act 1982, as amended. This provides among other things that "in assessing the damages payable to the injured person in respect of personal injuries there shall not be taken into account so as to reduce that amount .... any contractual pension or benefit ....". At the time he received his injury, Mr Cantwell was a serving police officer covered by the statutory Police Pensions scheme. It is agreed that this scheme is to be treated as a "contractual" pension scheme even though it was the creature of section 1 of the Police Pensions Act 1976 and the Police Pension Regulations made thereunder. The terms of the scheme are to be found in the Regulations and in particular Schedule B to the 1987 Regulations (SI. 1987 No.257) as amended. It is essentially a contributory scheme with the benefits calculated by reference to periods of service and average earnings. Following the drafting of s.1 of the Act and Part B of the 1987 Regulations, the Schedule deals with the various personal awards which may be made under the scheme. These include the "Policeman's Ordinary Pension" payable to a policeman who retires after at least 25 years pensionable service (Article B1 and Part I of the Schedule) and the "Policeman's Ill-Health Pension" payable to a policeman who retires early on the grounds of ill-health (Article B3 and Part III of the Schedule ).
48. As a result of his injury, Mr Cantwell suffered a number of losses. These included losses of earnings and loss of pension. At the time of the incident Mr Cantwell was not too far off completing his 25 years service and becoming entitled to retire on the full 'ordinary' retirement pension. Following his injury he had, in effect, to take early retirement. Because he was retiring on health grounds, he immediately qualified for (among other personal awards) an ill-health pension payable under Part III of the scheme without having to wait until he reached his normal retirement age. As his pension became payable earlier than otherwise would have been the case and because he was no longer working and therefore no longer notionally contributing to his pension out of his wages as a police officer (together with notional employer's contributions), the pension was lower than it would have been if he had continued to work in the police force till his normal retirement age. Accordingly, when he came to the age when, if in good health he would normally have retired, he was only entitled to a reduced pension. He thus suffered a loss of pension which he was entitled to recover from the wrongdoer or from the Criminal Injuries Compensation Board.
49. The argument of Mr Cantwell is that he has lost his 'ordinary' pension of about £15,200 pa and has received an 'ill-health' pension of about £13,500 instead. He says that under s.10 the £13,500 is to be disregarded and not taken into account. Accordingly he submits that he is entitled to claim compensation on the basis of having lost £15,200 pa not £1,700 pa. He was not successful before the single member or the Appeal Board. The Lord Ordinary upheld the Appeal Board but the Inner House disagreed and held that the claim should have been allowed:  SC 407.
50. Both counsel adopted the formulation of Lord Reid in Parry v Cleaver  AC 1 at p.13:
Lord Reid is thus posing two questions of fact and a third question of law. Mr Cantwell would answer them (on the figures we are using): £15,200; £13,500; no. The appellants would answer the first question £1,700 and the remaining questions do not arise; s. 10 does not apply because there is no sum which is being taken into account in reduction of the amount of Mr Cantwell's loss.
51. In my judgment the appellants are right. Like very many questions arising in relation to the law of the assessment of damages, it is really a question of fact and finding the answer depends not so much upon any principle of law but on the application of sound processes of reasoning. In the present case what is involved is Mr Cantwell's loss of pension following his reaching the age at which he would ordinarily have retired. There is no dispute between the parties as to the treatment of the earlier period between the time he received his injuries and the time he reached his normal retirement age. On any view the first question to be answered is what loss has Mr Cantwell suffered. Mr Cantwell has been enabled to formulate his claim only because the pension scheme uses different terms to describe the full-term pension - the 'ordinary' pension - and the advanced but reduced pension - the 'ill-health' pension. He will not get the former; he will only get the latter. But he will get a pension under the scheme. It is still the same scheme; the payer remains the same. It remains the same type of pension, that is to say, a pension paid out of contributions which are treated as having been made over the duration of his employment in the police service. The only thing that has changed during the relevant period is that it is paid at a reduced rate. In this situation, to say that the sum which Mr Cantwell would have received but for the accident and which, by reason of the accident, he can no longer get was £15,200 pa does not accord with the admitted facts. He has not lost the whole of that sum. He has only lost part of it. The correct way to describe what has happened is to say that his pension has been reduced. Similarly, if the reduction in his pension had been smaller, say, £100 pa, it would more readily be appreciated that it would be an abuse of language to say that he had lost £15,200. Yet the logic of his argument would be the same. Mr Cantwell's argument fails on the facts. (See also Lord Reid's dictum at  AC pp.20-1 stressing the need to compare like with like, followed and applied by Oliver LJ in Auty v NCB  1 WLR 784 at p.807.)
52. In view of this there is no need to go into the legal fallacy which underlies much of the argument of Mr Cantwell. The law draws a distinction between the suffering of a loss and the mitigation of that loss. Mitigation is a form of the avoidance of loss either as the result of receiving some benefit which would not have been received but for the incident which gave rise to the loss or as the result of voluntarily taking advantage of an opportunity to reduce the loss. The subject matter of s.10 is the inclusion or exclusion of mitigation. The statute makes additional provision for what may and may not be taken into account by way of mitigation in qualification or supplement of the common law rules. But the original structure is still there. The question of mitigation only comes into the assessment after the loss itself has been ascertained. It is true that criteria of causation are used throughout the enquiry as are criteria of remoteness. But mitigation and avoidance of loss remain concepts of the mitigation and avoidance of losses which have already been identified. It is this first vital step which Mr Cantwell's argument misses out.
53. For these reasons and those given by my noble and learned friend Lord Hope of Craighead, I agree that the appeal should be allowed as he has proposed.
LORD SCOTT OF FOSCOTE