Summary
This was a private law case about damages due to the Claimant who was seriously injured as a result of a road accident and will require care for the rest of her life. The underlying issue was that of the well-established principle of avoiding “double recovery”, whereby a claimant cannot claim for the same loss twice. In this case, the Claimant could not claim the costs of her care from both the tortfeasor and the State. However she could seek state funding if and when the Periodical Payment (PP) paid to cover the costs were to be used up, in any given year. The issue at hand was whether the Claimant would be required to meet any shortfall in meeting the cost of her care from any accumulated surplus she might have from previous years where she did not spend the full amount of the PP on her care.
The judgment in this case was that the PPs are to be treated solely as damages relating to care (and case management) during the relevant year for which those services are provided, meaning that the Claimant can spend any surplus as she sees fit, rather than having to set it aside to meet any shortfall in her care costs in future years.
Background
In 2016, the Claimant, a woman who is now 36, was the front-seat passenger in a car which was being driven by the Defendant, when he lost control of the car. There was also an on-coming car, the driver of which has never been found. Because the Judge found the Defendant to be at least partially responsible, he was found to be liable to the Claimant for the catastrophic injuries she suffered.
The injuries consisted of a comminuted fracture of the C6 vertebrae, with the spinal cord damaged beyond repair, such that she is now tetraplegic with some limited movement in her upper limbs.
The Claimant had full litigation capacity and capacity to manage her own financial affairs.
Agreement between the Parties
The parties reached agreement:
(1) On the form of the award of damages, namely a lump sum and a Periodical Payments Order (PPO) providing for annual Periodical Payments (PPs) in respect of care and case management, index linked, in the usual way, to the 80th centile of the relevant wage inflation indices published by the ONS, which in this case were ASHE 6135 and 6136.
(2) On the figures for the lump sum and the initial annual PP, namely £6.25m and £325,000 respectively.
(3) That the lump sum award should be a provisional award to reflect the risk of a syrinx developing [a cyst in the spinal cord/brain stem], and that should this occur, the Claimant could return to Court to seek further damages.
The Claimant’s lump sum was to be placed in a Personal Injury Trust, which means that sum would not be taken into account when assessing her means for the purpose of determining her entitlement to state funding for the costs of care, and the same is true of the annual PPs in respect of care and case management.
This was essentially the same issue in Sowden v Lodge [2005] 1 WLR 2129 (CA).
Although it was not certain that Claimant would ever have recourse to seek state funding for her care, there was insufficient material before the Judge to enable him to find as a fact that the Claimant would never apply for state funded care, a finding which has been made in other cases. The Judge made the point that, as the law stands at present, it is only state funding for the cost of care that is in issue. There is no state funding for private case management, the cost of which must be met from the Claimant’s funds, and the relevant order in this case included a provision to deal with this issue in the form of an appropriate undertaking. It was agreed that the Claimant would not apply for state funding in any year until the annual PP had been used up.
The parties also agreed on a mechanism to be employed in the event that the full amount of state funding is not used and the state funder, for whatever unlikely reason, declined to accept repayment of that sum or the Claimant declined to make the repayment.
The issue between the parties would only arise if the cost of care and case management exceeded £325k in any year, with a working assumption being that the cost of case management would easily be met from the annual PP of £325k, with only the additional costs of care being sought from state funder(s). For the purposes of this claim and for the sake of simplicity, the parties did not take account of the fact that the PP amount would likely increase year on year because it is linked to the relevant Office for National Statistics (ONS) wage inflation indices, so the figure of £325k was used throughout.
The Parties’ positions
The Claimant’s position was that the accounting process should be conducted on an annual basis, and so if in any year she did not spend all of the £325k, the surplus would be for her to do with as she pleases.
The Defendant’s position was that the payment of PPs was in the nature of a running account, and therefore if in any year the Claimant spent more than the £325k on care and case management, the shortfall would need be met from any accumulated surplus (if there was one) from previous years where the Claimant spent less than the £325k. Only when the accumulated surplus is exhausted may the Claimant once more apply for a state funding “top up” to meet any shortfall between the PP and the actual costs of care. It was assumed that the cost of case management would easily be paid for out of the £325k PP, so the shortfall would be purely in respect of care.
The law as it pertains to double recovery
In cases where a Claimant seeks compensation from a tortfeasor [that is, someone who commits a civil wrong] in respect of personal injuries and consequential losses, it is trite law that a Claimant can only be compensated once in relation to any head (i.e. category] of loss. If the tortfeasor pays full compensatory damages in respect of the relevant head of loss, the Claimant cannot seek assistance from the State in respect of that head of loss.
The well-known dictum of Lord Bridge in Hodgson v Trapp[1989] 1 AC 807 is: “There could hardly be a clearer case than that of the attendance allowance payable under [the relevant Act of Parliament] where the statutory benefit and the special damages claimed for cost of care are designed to meet the identical expenses. To allow double recovery in such a case at the expense of both taxpayers and insurers seems to me incapable of justification on any rational ground.” [CASCAIDr emphasis added]
In Bowker v Rose, The Times, 3 February 1978 (also referred to in Hodgson v Trapp at pages 821H to 822A) where the point was made that there are other sources of relevant assistance, the dictum of Roskill LJ was: “[T]he questions that arise can never be determined in the abstract. Each must depend on the terms of the particular contract, pension scheme, charitable benefaction or statute governing the benefit conferred.”
A person can be found to be contributorily negligent, and thus not recover full damages. They can also – or their case manager or deputy – may make unfortunate decisions that run the money down inappropriately, and this means that the individual still has care needs that the state must meet.
Statutory funding provisions
Funding from local authorities is governed by the Care Act 2014, as supplemented by the Care and Support (Direct Payments) Regulations. In the case of a person with relevant capacity, the amount and frequency of payments will be set out in the care plan under Section 25. The combined effect of this legislation is that the Claimant’s entitlement to direct payments must be reviewed at least annually (regulation 7) and must be repaid if not used for care (Section 33).
Relevant funding is also available from the NHS by way of direct payments from a health body. The relevant statutory provision is the National Health Service (Direct Payment) Regulations. Regulation 10 requires payments to be made into a “managed account” exclusively for the purpose of receiving funding and paying for the relevant service or services. Regulation 14 requires a health body to review the making of direct payments to or in respect of a patient “at appropriate intervals”. In particular there must be a review at least once in the first three months of the direct payments being made and subsequently at intervals not exceeding twelve months. Regulation 15 deals with repayment of direct payments: “(1) A health body may require that part or all of a direct payment must be repaid to the health body, if satisfied that it is appropriate to require repayment having regard in particular to whether (a) the care plan has changed substantially; (b) the patient’s circumstances have changed substantially; (c) a substantial proportion of the direct payments received by a patient, representative or nominee have not been used to secure services specified in the care plan and have accumulated; (d) the direct payments have been used otherwise than for a service specified in the care plan; (e) theft, fraud or another offence may have occurred in connection with the direct payments; or (f) the patient has died“.
Case Law
In the case of payments from LAs and from the NHS, the issue of direct payments is considered at least annually. In Regulation 15, the power to require repayment is discretionary (“may require”) and in the first two instances where repayment may be required, it is only in the event of “substantial” change, and in the third instance, the underspend must also be “substantial”.
Cases subsequent to Hodgson v Trapp have endorsed the principle that double recovery must be avoided wherever possible. In some cases, the object has been to seek to avoid the possibility of double recovery. In others, the object has been to provide a mechanism for repayment in the event of double recovery.
In Sowden, the Claimant was held to be contributorily negligent to the extent of 50%, so that she would not recover sufficient money to pay for the care she required (In fact, she was being provided with state-funded residential accommodation). It was held that there should be a reduction in the award of damages to avoid double recovery, although assessment of the amount was remitted back to the trial Judge to allow the Claimant to present evidence on the issue of “augmented” care. This was an example of the Court taking steps to avoid double recovery by adjusting the size of the award of damages.
The same result followed in Crofton v NHSLA [2007] 1 WLR 923 (CA). There, the Claimant recovered 67.5% of the full value of the appropriate award of damages. The Judge made a deduction from the amount the Claimant would otherwise have received (itself reduced on account of the level of contributory fault) to take account of the value of state funding received by the Claimant. That decision was upheld by the Court of Appeal.
Peters v East Midlands Strategic Health Authority [2009] EWCA Civ 145 is an example of a case where steps were taken to avoid even the possibility of double recovery. The affairs of the severely disabled Claimant were being managed by a Deputy appointed by the Court of Protection (CoP). The Deputy had offered an undertaking not to seek statutory funding for the Claimant’s care and accommodation, but the Judge refused to accept such an undertaking. Before the Court of Appeal a modified undertaking was offered which involved the Deputy undertaking to notify the CoP of the outcome of the current proceedings and to seek from the CoP (a) a limit on the authority of the Deputy whereby no application for certain statutory funding can be made without further order of the CoP and (b) provision for the Defendants to be notified in the event of such application being made. It was held that: “[65] this is an effective way of dealing with the risk of double recovery in cases where the affairs of the claimant are being administered by the Court of Protection. It places the control over the deputy’s ability to make an application for the provision of a claimant’s care and accommodation at public expense in the hands of a court.“
In R (Tinsley) v Manchester City Council [2018) QB 767, the validity of such an undertaking (in Peters) was questioned. However, the underlying concern was the avoidance of double recovery. In Tinsley, Longmore LJ stated that: “[26] It is, of course, the case that courts will seek to avoid double recovery by a claimant at the time they assess damages against a negligent tortfeasor. If therefore it is clear at trial that a claimant will seek to rely on a local authority’s provision of after-care services, he will not be able to recover the cost of providing such after-care services from the tortfeasor.”
The most recent example of a repayment mechanism is CCC v Sheffield Teaching Hospitals [2023) EWHC 1770 (KB), where reference was made to a “Peters Promise“. CCC concerned a Claimant born with cerebral palsy. Although she was a child at the trial to determine quantum, she will always lack capacity to manage her affairs. In CCC, the Judge dealt with the fact that the Claimant was in receipt of Direct Payments and apparently would or may continue to use them. He directed that:
“[180] The sums received by the Claimant from the State for care by way of direct payments should be refunded to the Defendant annually on the day in December when the first PPO is made and annually thereafter. Otherwise the Claimant will receive more than she needs. I invite the Claimant to provide an undertaking to the court to refund the total sum received from the state for care on that date each year (a limited Peters Promise). I invite counsel to draft the undertaking. If the undertaking is not provided, I shall reconsider how best to account for the deduction simply by deducting the current annual payment. That would not take into account future changes and so would be rough and ready.”
The Judge in this WNA case accepted Counsel for the Defendant’s analysis that the “primary solution” to the double recovery problem would be to reduce damages to reflect likely receipt of public funding in the future. That would require there to be evidence upon which the Judge could make a finding on the balance of probabilities that such receipt is, indeed, “likely”. However, it was also possible for him to make a finding that such an outcome would be “unlikely”, as was the position in Freeman v Lockett [2006] EWHC 102 (QB), where the Claimant had full capacity and recovered damages in full. In the Freeman case, the Judge was able to find on the evidence that on receipt of damages for future care the Claimant would withdraw her application for state funding and would not reinstate it, thus no issue of double recovery arose.
Summarising the case law, the Judge stated that the common mechanisms to avoid double recovery are:
(1) Reducing the once and for all lump sum.
(2) Providing a mechanism for repayment to the provider of state funding.
(3) Providing a mechanism designed to inhibit a claim for statutory funding, at least not without some court oversight.
The PPO Mechanism
The Damages Act 1996 does not specify the frequency of payment under a PPO. Section 2(1)(a) simply provides that:
“(1) A court awarding damages for future pecuniary loss in respect of personal injury –
(a) May order that the damages are wholly or partly to take the form of periodical payments, …”
Section 2(8) provides for variation of the amount of payment by reference to the Retail Price Index (RPI):
“(8) An order for periodical payments shall be treated as providing for the amount of payments to vary by reference to the retail prices index (…) at such times, and in such manner, as may be determined by or in accordance with the Civil Procedure Rules.”
The reference to the RPI might suggest annual variation, but Section 2(9) provides that the order may include provision disapplying or modifying the effect of subsection (8). Whether that power is in practice used much or at all is not something that was canvassed before the Judge.
Things are made clearer by Part 41 of the CPR:
“41.8 – (1) Where the court awards damages in the form of periodical payments, the order must specify –
(a) the annual amount awarded, how each payment is to be made during the year and at what intervals;[…]
(d) that the amount of the payments shall vary annually by reference to the retail prices index, unless the court orders otherwise under section 2(9) of the 1996 Act.
It was therefore clear in the judgment, that at least in the case of a PPO in respect of the cost of future care (and case management), the amount is calculated on an annual basis and in practice is usually paid annually in advance. The practice has arisen of using 15 October as the trigger date for the commencement of calculation of any variation in the amount payable under a PPO because that is the date on which the ONS usually publishes the Annual Survey of Hours and Earnings (ASHE) by reference to Standard Occupational Classifications (SOC). The proposed order in this case refers to SOC 6135 (care workers and home carers) and SOC 6136 (senior care workers).
Analysis
The Judge accepted Counsel for the Defendant’s submission that the Court should be alert to double recovery, and not only deprecate it where it arises but actively intervene to prevent it, but thought the submission that the fact of the annual nature of the payment of damages presented an opportunity for oversight to ensure that double recovery did not arise required further consideration.
The Judge concluded that the key questions in cases where the annual Periodical Payment is for care and case management are:
(1) is the annual payment of money under a PPO to be treated as payment in respect of damages for care (and case management) generally, including future costs? or
(2) is the annual payment of money under a PPO to be treated as payment in respect of damages for care (and case management) only for the year in respect of which it is paid?
If the payment is in respect of the costs of care (and case management) generally, then the argument for treating such PPs as amounting to a fund, any surplus of which is available to be used in future years only for that purpose, was strong.
Then, when considering whether the payment was to be treated as being referrable only to the costs in the year in respect of which it is paid, the Judge found it notable that the accounting period for PPs in cases such as this is the same as the accounting period for the assessment of state funding (i.e. annual) and went on to consider whether the co-incidence of accounting periods was significant.
However, he found that the Defendant’s case, that what was required was an annual running account with any unspent surplus of an individual year’s PP being set aside to be used in future years, if and when there was a shortfall, was too simplistic an approach and ignored the realities. The practical problems being:
(1) Is there a minimum annual amount of surplus to be taken into account, and, if so, what is it? He had in mind here the reference to “substantial” in the NHS Regulations.
(2) If there is no minimum amount, it means that sums of a few pounds or pence must be ring-fenced in case in the future, perhaps many years in the future, there is a shortfall.
(3) In a case such as this, where the Claimant has full capacity to manage her own affairs, is it proportionate to require detailed records to be kept perhaps for many years? If not, and the concept of annual accounting is rejected, is there a cut off point where any accumulated surplus may be spent as the Claimant wishes? If so, what is that cut off point? Six years or some other and if so what period? Counsel for the Defendant submitted that the administrative burden on the Claimant would be “slight”, however the Judge questioned whether a life-long obligation to keep and retain records met the definition of “slight”.
(4) Is the cause of the surplus relevant? What if, say, the reason is that suitable and sufficient staff were not available, so that the Claimant had to struggle on with inadequate care to meet her needs and had a frankly horrid time over the year. Would she be able to say “I have struggled and suffered over this year. I am going to treat myself to something lovely to compensate and I am going to use the money not spent on non-existent carers to do so”?
(5) In a similar vein, the PPs in this case are also in respect of case management, for which (at present) no state funding is available. What if the surplus is the result of an underspend on case management?
(6) Is there an obligation to keep any surplus in an interest-bearing account and if so, is the interest to be counted as surplus to pay for care in future years?
There was also an anomaly in the “running account” process proposed on behalf of the Defendant in that it was only prospective and not retrospective. If there was no accumulated surplus at time when state funding was obtained, but in future years there was a surplus, why should that surplus not be paid retrospectively to the State? It was not proposed by the Defendant that it should.
The problem with the avoidance of double recovery was that, in the case of once and for all lump sum awards in respect of care, rough and ready adjustments would have to be made to guard against any prospect of double recovery, because precision would be impossible.
Counsel for the Defendant recognised this when he conceded in his skeleton argument that in such cases there “may be a blurring of the lines within a settlement figure” before going on to submit that “there can be no question that the periodical payment, and hence any unspent part of it, is and remains moneys that have been designed solely to meet care and case management costs“.
In cases such as this one, with annual PPs paid to provide care (and case management) it is possible to achieve a much greater degree of accuracy if one looks at the issue on a year-by-year basis. If in any one year the PP is not enough, in that Claimant spends all of the PP on care (and case management) but requires additional state funding, there is no double recovery provided that at the end of the year, any unspent element of state funding is repaid to the State. That is what was proposed in this case.
The Judge agreed with Counsel for the Defendant’s submission that the annual payment may only be used for care and case management but with one crucial qualification: that the annual payment may be used only for care and case management within the relevant accounting period, which in this case is a single year.
Findings
The judgment in this case was that the PPs are to be treated solely as damages relating to care (and case management) during the relevant year for which those services are provided. If the money is not wholly spent to meet the cost of care (and case management) provided during that year, there is no obligation to accumulate the surplus to pay for care (and case management) in subsequent years. The Judge thought this was in keeping with the ethos of a PPO, namely that the money paid to the Claimant is to be used to provide care (and case management) for the year in respect of which the annual PP is made.
It therefore also followed that in respect of any surplus at the end of any particular year, the Claimant is at liberty to deal with it as she sees fit: Wells v Wells [1999] 1 AC 345 (HL) per Lord Clyde at p394H citing Lord Fraser in Cookson v Knowles [1979] AC 556, 577D:
“It is for the plaintiff to decide how the award is to be applied. Whether he is proposing to invest it, or spend it, or more particularly, exactly how he is going to invest it or spend it does not affect the calculation of the award.”
CASCAIDr Comment: This recent case gives an excellent overview of the principle of double recovery and the up-to-date case law which shows how it has been applied in a range of contexts.
The judgment is perhaps sensible for being consistent with the idea of compensation for wrongs sounding in private law. That is, that a victim of negligence should be put back in the position that s/he would have been in had the wrong not happened, which will involve spending what it takes to achieve normalisation of wellbeing, not merely an adequate sum that might be defensible as the standard to be met by a social services council which merely has to reduce the impact of the need on wellbeing to something less than ‘significant’.