England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HHJ GRIGGS
(PLYMOUTH COUNTY COURT)

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th March 2003

Lord Justice Latham:

This is the judgment of the Court.

1. On the 31^st March 1995, the appellant fell at work and injured her left shoulder. She was employed by the respondents on a part time basis as a kitchen manager. The Judge, HHJ Griggs, found that the respondents were primarily responsible for her accident, but that she had contributed to it to the extent of one third. He assessed damages on a full liability basis at £34,587.58 which, after the reduction to reflect her contributory negligence, resulted in a judgment of £23,058.39p. The respondents had made a CPR Part 36 payment of £10,000. The Notice aggregated this sum with a certificate of recoverable benefit under the Social Security (Recovery of Benefits) Act 1997 (the Act) of £15,669.91p making a gross sum of £25,669.91p. The judge concluded that the appellant had therefore not bettered the Part 36 payment and ordered the appellant to pay the respondent's reasonable costs from the date of the making of the Part 36 Payment.
2. The appellant was given permission to appeal on three grounds:

i) that the judge was wrong to conclude that the appellant had contributed in anyway to the accident,

ii) that his award of £9,000 by way of general damages for pain, suffering and loss of amenity was inadequate, and

iii) that the judge was wrong to order her to pay the costs of the claim after the Part 36 payment.

3. At the hearing before us, the appellant did not pursue her appeal against the damages awarded for pain, suffering and loss of amenity. It became apparent at an early stage in the proceedings that the appeal in relation to the order made by the judge as to costs raised an issue of some practical importance and difficulty in relation to the construction of the Act and the effect of the relevant provisions of Part 36. We were accordingly assisted by argument from counsel for the Secretary of State for Work and Pensions.
4. In order to deal with the appeal against the judge's finding that the appellant's damages should be reduced by reason of her contributory negligence, it is necessary to return to the facts in more detail. The kitchen in which the appellant worked was adjacent to the school hall which was used for gym classes as well as being the school dining hall. Food was served through a hatch behind which were the hotplates, and which was closed by means of a shutter. To one side of the hotplates there was a hinged flap and a stable type door from floor level to the level of the shutter, through which access could be obtained from the kitchen into the hall.
5. On the day in question, the hall was in use for a gym class immediately before lunch. The appellant was intending to carry the day's menu board through to the hall once the class was finished and the apparatus put away. The appellant lifted the shutter slightly to see whether the class was still using the hall, and saw that they had not finished. She looked again later and saw that the gym benches had been stacked away in their usual place, and that members of her staff had set up the lunch tables and were busy laying them. Accordingly, she raised the shutter, lifted the flap, and opened the door in order to carry the menu board out. As she did so, she fell over what transpired to be one of the gym benches about one foot high and eight feet long which had been left across the doorway. She had not seen it. Her claim for compensation was based upon the assertion that the bench had been left in a position which created a foreseeable danger to anyone emerging from the kitchen by a servant or agent of the respondents who were accordingly in breach of their obligations to the appellant under the Occupiers Liability Act, and/or were negligent.
6. The only factual witness called at the trial was the appellant herself. There was no evidence that this particular problem had ever arisen before. According to her, therefore, she had no reason to believe that there would be any obstruction across the door when she carried out the menu board. The judge concluded that the bench had been left "in an extremely silly place" by the person responsible for clearing the hall after the gym lesson. He had no doubt that the respondents were accordingly liable. He concluded, however, that the appellant, as the kitchen manager, had a measure of responsibility for seeing that everything was in a satisfactory condition. She should not have gone through the door carrying the menu board without first having checked, particularly because the menu board was bound to restrict her vision. He accordingly found her one third to blame.
7. This court is always reluctant to interfere with the conclusions of a trial judge as to contributory negligence. But there is no particular magic in the fact that the judge saw and heard the only witness in the present case. There was no dispute as to the facts. It seems to us that the judge imposed an unrealistically high standard of care on the appellant in the circumstances. She was doing something which she did every day. There was nothing to suggest that there had been any problems of this sort before. She had noted that the benches appeared to have been put away in the proper place. Her staff were laying up the tables, and therefore giving every indication that nothing was untoward. Whilst it is easy to say that she should have looked where she was going, that ignores the everyday realities of her working environment. In the absence of any reason for her to suspect that something might have been left across her access to the hall, we consider that she was entitled to assume the hall had been cleared properly. To say that she should have nonetheless looked to see whether or not something might have been left across the doorway was a counsel of perfection which should not have resulted in the finding of contributory negligence.
8. We would accordingly allow the appeal. The result is that the appellant is entitled to the full damages awarded of £34,587.58p Whatever may be the result of the argument about the effect of the Act and Part 36, she has clearly bettered the Part 36 payment and is accordingly entitled to her costs.
9. Despite the fact that the argument in relation to costs is, strictly speaking, academic in the context of this case, the facts of this case provide a very good example of a real problem arising out of the Act and its application in Part 36 on which we have heard full argument, and have had help from the Secretary of State. In those circumstances, we consider that we should provide such guidance as we can for the assistance of litigants and their advisors.
10. The appellant's complaint about the judge's order for costs was that if she had accepted the Part 36 payment, she would only have received £10,000, the balance being paid to the Compensation Recovery Unit. The judge's order, however, would have resulted in her receiving £15,738.91p. It was therefore argued that it was unjust to have penalised her in costs in circumstances where she had in fact received more money as a result of the trial than had been offered in the Part 36 payment. The way the judge's award was calculated was as follows. On a full liability basis, he awarded £9,000 for pain, suffering and loss of amenity, £6,000 for loss of congenial employment, £5,500 for home maintenance, £500 for travel expenses, £1,500 for loss of pension entitlement, and £8,253.82p for past loss of earnings, to which was added £2,725.41p by way of interest. By section 8(3) of the Act, the respondents were only entitled to set off the amount of the recoverable benefits certificate, which they were required to meet in full, against the damages for past loss of earnings and interest on that sum. The amount of the award under this head after deducting one third for contributory negligence, was £7,319.48p. Deducting this, which was notionally met by the respondent's payment under the certificate, resulted in the net payment to the appellant of the sum to which we have already referred. The respondents remain liable under section 6 of the Act for the whole of the certified sum, and must appeal if they wish to recover the excess.
11. This apparently anomalous position resulted from three particular features of the effect of the scheme of the Act and the Rules on this case. First, the Act required the respondents to meet the full amount of the certificate. No provision is made for a reduction to reflect any finding of contributory negligence. Second, although the certificate identified benefit payments up to 5 years from the date of the accident, the statutory cut-off point, the judge concluded that the appellant was only entitled to lost earnings as a result of the accident up to January 1998. Third, while section 8(3) of the Act makes it clear that payment of the certified amount is only satisfaction of such part of the appellant's claim as relates to lost earnings, the Part 36 payment was treated as if payment of the certificate was part satisfaction of the whole claim. When the matter first came before this court, differently constituted, we were informed that an appeal was pending in relation to the amount of the certificate on the basis of the judge's findings in relation to the effects of the accident which, it was said, should only have resulted in payment of benefits up to January 1998, which would reduce those benefits to something in the region of £6,000. The hearing was therefore adjourned to await the outcome of the appeal. In the event, for reasons to which we will return, the appellate authorities declined to accept the appeal on the basis that the case had not been finally determined by reason of the fact that this appeal was still outstanding. To understand how the present situation has arisen, it is necessary to set out the relevant provisions of the Act, the Social Security (Recovery of Benefits) Regulations 1997 (the Regulations) and Part 36.
12. The Act as amended by the Social Security Act 1998 provides:

"1 (1) This Act applies in cases where -

(a) a person makes a payment (whether on his own behalf or not) to or in respect of any other person in consequence of any accident, injury or disease suffered by the other, and

(b) any listed benefits have been, or are likely to be paid to or for the other during the relevant period in respect of the accident, injury or disease.

(2) The reference above to a payment in consequence of any accident, injury or disease is to a payment made -

(a) by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of the accident, injury or disease ….

(3) Sub-section (1) (a) applies to a payment made -

(b) voluntarily, or in pursuance of a court order or an agreement, or otherwise ……

(4) In a case where the Act applies -

(a) the "injured person" is the person who suffered the accident, injury or disease,

(b) the "compensation payment" is the payment within sub-section (1)(a) and

(c) "recoverable benefit" is any listed benefit which has been or is likely to be paid as mentioned in sub-section (1)(b).

…….

4. (1) Before a person ("the compensator") makes a compensation payment he must apply to the Secretary of State for a certificate of recoverable benefits.

…..

6. (1) A person who makes a compensation payment in any case is liable to pay to the Secretary of State an amount equal to the total amount of the recoverable benefits.

(2) The liability referred to in sub-section (1) arises immediately before the compensation payment or, if there is more than one, the first of them is made.

……

8. (1) This section applies in a case where, in relation to any head of compensation listed in column 1 of Schedule 2 -

(a) any of the compensation payment is attributable to that head, and

(b) any recoverable benefit is shown against that head in column 2 of the Schedule.

(2) In such a case, any claim of a person to receive the compensation payment is to be treated for all purposes as discharged if -

(a) he is paid the amount, (if any) of the compensation payment calculated in accordance with this section, and

(b) if the amount of the compensation payment so calculated is nil, he is given a statement saying so by the person who (apart from this section) would have paid the gross amount of the compensation payment.

(3) For each head of compensation listed in column 1 of the Schedule for which paragraphs (a) and (b) of sub-section (1) are met, so much of the gross amount of the compensation payment as is attributable to that head is to be reduced (to nil, if necessary) by deducting the amount of the recoverable benefit or, as the case may be, the aggregate amount of the recoverable benefits shown against it.

(4) Sub-section (3) is to have effect as if a requirement to reduce a payment by deducting an amount which exceeds that payment were a requirement to reduce that payment to nil.

(5) The amount of the compensation payment calculated in accordance with this section is -

(a) the gross amount of the compensation payment,

less,

(b) the sum of the reductions made under sub-section (3), (and, accordingly, the amount may be nil).

9. ……

(4) For the purposes of this Act -

(a) the gross amount of the compensation payment is the amount of the compensation payment apart from section 8, and

(b) the amount of any recoverable benefit is the amount determined in accordance with the certificate of recoverable benefits.

10. (1) Any certificate of recoverable benefits may be reviewed by the Secretary of State -

(a) either within the prescribed period or in prescribed cases or circumstances; and

(b) either on an application made for the purpose or on his own initiative.

……

11. (1) An appeal against a certificate of recoverable benefits may be made on the ground -

(a) that any amount, rate or period specified in the certificate is incorrect, or

(b) that listed benefits which have, or are likely to be, paid otherwise than in respect of the accident, injury or disease in question have been brought into account; or

(c) that listed benefits which have not been, and are not likely to be, paid to the injured person during the relevant period have been brought into account, or

(d) that the payment on the basis on which the certificate was issued is not a payment within section 1(1)(a).

(2) An appeal under this section may be made by -

(a) the person who applied for the certificate of recoverable benefits; or

(aa) (in a case where that certificate was issued under section 7(2)(a)) the person to whom it was so issued, or

(b) (in a case where the amount of the compensation payment has been calculated under section 8) the injured person or other person to whom the payment is made.

(3) No appeal can be made under this sub-section until -

(a) the claim giving rise to the compensation payment has been finally disposed of, and

(b) the liability under section 6 has been discharged.

………

12. (1) The Secretary of State must refer an appeal under section 11 to an appeal tribunal.

……….

(3) In determining any appeal under section 11 the tribunal must take into account any decision of a court relating to the same, or any similar, issue arising in connection with the accident, injury or disease in question.

…….

14. (1) This section applies in cases where a fresh certificate of recoverable benefits is issued as a result of a review under section 10 or an appeal under section 11.

(2) If -

(a) a person has made one or more payments to the Secretary of State under section 6, and

(b) in consequence of the review or appeal, it appears that the total amount paid is more than the amount that ought to have been paid,

regulations may provide for the Secretary of State to pay the difference to that person, or to the person to whom the compensation payment is made, or partly to one and partly to the other.

………"

13. In the present case, the head of compensation in column 1 of Schedule 2 to the Act which was relevant was the claim for loss of earnings, and the relevant benefits under column 2 were disablement pension which was paid from 19^th July 1995 to the 31st March 2000 and Income Support which was paid from the 8^th December 1995 to the 31^st March 2000.
14. The regulations provide:

"…..

8. (1) Subject to the provisions of this regulation, where a party to an action makes a payment into court which, had it been paid directly to another party to the action ("the relevant party"), would have constituted a compensation payment –

(a) the making of that payment shall be treated for the purposes of the 1997 Act as the making of a compensation payment;

(b) a current certificate of a recoverable benefit shall be lodged with the payment; and

(c) where the payment is calculated under section 8, the compensator must give the relevant party the information specified in section 9(1), instead of the person to whom the payment is made.

(2) The liability under section 6(1) to pay an amount equal to the total amount of the recoverable benefits shall not arise until the person making the payment into court has been notified that the whole or any part of the payment into court has been paid out of court to or for the relevant party.

….

11. (1) Where the conditions specified in sub-section (1) and paragraphs (a) and (b) of subsection (2) of section 14 are satisfied, the Secretary of State shall pay the difference between the amount that has been paid and the amount that ought to have been paid to the compensator.

…..

(4) This paragraph applies where -

(a) the amount of the compensation payment made by the compensator was calculated under section 8; and

(b) the Secretary of State has made a payment under paragraph (1).

(5) Where paragraph (4) applies, the amount of the compensation payment shall be recalculated under section 8 to take account of the fresh certificate of recoverable benefits and the compensator shall pay the amount of the increase (if any) to the person to whom the compensation payment was made.

……"

15. The provisions of CPR Part 36 relevant to the claim in the present case, are as follows:

"36.3 (1) Subject to Rules 36.5(5) and 36.23, an offer by a defendant to settle a money claim will not have the consequences set out in this Part unless it is made by way of a Part 36 payment.

…..

36.20 (1) This rule applies where at trial the claimant:

(a) fails to better a Part 36 payment; or

(b) fails to obtain a judgment which is more advantageous than a defendants part 36 offer.

(2) Unless it considers it unjust to do so, the Court will order the claimant to pay any costs incurred by the defendant after the latest date on which the payment or offer could have been accepted without needing the permission of the court.

……..

36.23 (1) This rule applies where a payment to a claimant following the acceptance of a Part 36 offer or Part 36 payment into court would be a compensation payment as defined in section 1 of the Social Security (Recovery of Benefits) Act 1997.

(2) A defendant to a money claim may make an offer to settle the claim which will have the consequences set out in this Part, without making a Part 36 payment if,

(a) at the time he makes the offer he has applied for, but not received a certificate of recoverable benefits; and

(b) he makes a Part 36 payment not more than 7 days after he receives the certificate

(Section 1 of the 1997 Act defines "recoverable benefit")

(3) A Part 36 Payment Notice must state:

(a) the amount of gross compensation;

(b) the name and amount of any benefit by which that gross amount is reduced in accordance with section 8 and Schedule 2 to the 1997 Act; and

(c) that the sum paid in is the net amount after deduction of the amount of benefit.

(4) For the purposes of Rule 36.20, a claimant fails to better a Part 36 Payment if he fails to obtain judgment for more than the gross sum specified in the Part 36 Payment Notice.

……"

16. The Part 36 Practice Direction provides in para 10.5:

"In establishing in a trial whether a claimant has bettered or obtained a judgment more advantageous than a Part 36 Payment to which this paragraph relates, the court will base its decision on the gross sum specified in the Part 36 Payment Notice."

17. The history of the way that state benefit has been treated in the calculation of damages in personal injury actions has been set out by Lord Hope in his speech in Wadey –v- Surrey County Council [2000] 1 WLR 820 at page 826 ff. The scheme in its present form is clearly intended to ensure by the operation of section 8 of the Act that the recovery of benefits from the compensator should not impinge on the sum awarded to a claimant for pain, suffering and loss of amenities, or indeed on any claim other than those identified in Schedule 2 to the Act. The scheme in its previous form, originally enacted in the Social Security Act 1989, had permitted the compensator to deduct the amount of the certificate from the total award of damages, even if the amount of the certificate exceeded the amount recovered or recoverable for special damages and other heads of damage other than general damages. Section 8 of the Act is clearly intended to "ring fence" the general damages, and indeed any other damages other than the head of compensation relevant to the benefits in respect of which the certificate has been obtained.
18. The result is that now in at least two situations, both of which coincided in the present case, the compensator will be liable after trial to pay a total sum in excess of that which the court has awarded by way of damages. The first situation is where there has been a finding of contributory negligence, as a result of which the recoverable benefits exceed the sum awarded to the claimant for a relevant head of damage by reason of that finding. No provision is made in the Act for a reduction in the amount which the compensator is liable to pay to the Compensation Recovery Unit under section 6 by way of appeal or otherwise. The compensator, accordingly, has to meet the excess. The second situation is where the judge at trial concludes that the relevant period for assessing, as in this case, lost earnings, is less than the period for which relevant benefit was paid, so producing an apparent excess. Leaving aside for the moment the complication of a Part 36 payment, in that situation, the compensator will be entitled to appeal under section 11 of the Act and argue that the excess does not represent payments made "in respect of the accident, injury or disease". By virtue of section 12 the decision will be that of a tribunal which by section 12(3) must take into account the Court's decision.
19. Of course in many cases, perhaps most cases, the amount of recoverable benefit will not exceed the sum awarded for a relevant head of damage, even if that sum has been reduced by contributory negligence on the one hand or the effects of a finding by the judge that the period for which the claimant is entitled to lost earnings is less than the period for which benefit was paid on the other. In those situations, the compensator will be entitled to set off the whole of the certificate against the sum awarded. In the latter case, although the certificate could be appealable, there will be no incentive on the compensator to appeal it, as his gross liability would remain the same. The claimant, on the other hand, might wish to appeal, provided that there was no risk that the grounds upon which the certificate might be reduced could encourage the Secretary of State to re-open the original claim for benefit. We believe that the practical effects, again assuming the matter goes to trial without the complication of a Part 36 Payment, can be seen in the following simplistic examples based on a claim for general damages of £10,000, lost earnings of £10,000, with a certificate of recoverable benefits of £7,500:

a. The judge awards damages at the full amount for both general damages and special damages but makes a finding of 25% contributory negligence. In that situation, the claimant will receive £7,500 the general damages figure. The lost earnings award of £7,500 will be met by payment of the certificate.

b. The judge awards the full sums for both general and special damages, but makes a finding of 50% contributory negligence. The claimant will receive £5,000, being the general damage figure. Payment of the certificate will reduce the sum payable for special damages to Nil, but will leave the compensator liable for a total of £7,500 under the certificate, the result of which is that he pays a total of £12,500, as opposed to £10,000. The compensator is not entitled to appeal against the certificate.

c. The judge awards £10,000 general damages but reduces the period for which lost earnings can be claimed by a half producing a figure of £5,000. Payment by the compensator under the certificate discharges his liability, but results in his paying £2,500 more than the sum awarded to the claimant. The compensator can appeal. If the appeal is successful, so that the certificate is reduced proportionately to the judge's finding, namely to £3,750, the compensator will be entitled to the £2,500 which was the excess that he had paid above the sum awarded by the judge, and will be required to account to the claimant for the balance of £1,250 under Regulation 11(5) of the Regulations.

d. The judge makes a full award for general damages but reduces the period of lost earnings by one quarter. The result is an award of £7,500 special damages. This is met by the compensator paying the full amount of the certificate, although if the certificate were reduced proportionately the recoverable benefits which should be set against the special damages figure would be £5,625 leaving a balance due to the claimant of £1,875. In that situation, the claimant could appeal the certificate if he or she thought it worthwhile, and recover the £1,875 from the Secretary of State.

20. Practical problems, however, arise in the case of settlements, whether or not the result of Part 36 offers or payments, if the principle of ring fencing general damages is to be adhered to. If a settlement is to accord with that principle, the premise must be that the claimant should be able to negotiate on the basis that he or she is entitled to a proper sum for general damages, taking into account the risks of a finding of contributory negligence if appropriate, irrespective of the amount on the certificate. Leaving aside, for the moment, the effects of Part 36 and its impact on costs, the compensator would appreciate in a case where contributory negligence is part of the argument in negotiations, that the certificate would have to be paid in full in any event. Where there is an argument about the period over which benefits were paid in respect of the accident, injury or disease, the parties would have two choices. If the claimant considers that the sum offered is less than the appropriate figure for general damages, but that money could be recouped from the recoverable benefits paid under the certificate on the basis of information then available by way of an appeal, he or she could appeal and obtain, if the appeal were successful, the relevant excess. Alternatively, the compensator could take the burden of an appeal, in the hope of recovering what it considers to be the excess. Again, in the absence of Part 36, the negotiations would be coloured by the fact that if the matter went to trial, the burden of appealing would be on the compensator save in the case of example (d) above. For either party, the practical problem would be that the claimant had, prima facie, made claims which had been accepted for the full amount on the certificate, and there had been no finding of the court which could be taken into account by a tribunal under section 12(3) of the Act. It follows that the question of where the burden of appealing should be is of critical importance.
21. Part 36, however, is likely to be the background against which any negotiations or a settlement take place. If the judge's approach is correct, the compensator would be, in effect, able to transfer the burden of appealing in every case on to the claimant. If the compensator is to be entitled to bring into account for the purposes of a Part 36 payment the whole of the recoverable benefits under the certificate, it inevitably means that not only in considering whether or not to accept such an offer, but also when determining whether or not to accept an informal offer of settlement, the claimant may be forced to consider accepting a sum which is less than that which is appropriate for general damages. In other words the amount in the certificate will have impinged upon and reduced the amount of compensation which would otherwise be appropriate, contrary to the policy of the Act. Returning to the examples, it would mean that in examples (b) and (c), the compensator would be entitled for the purpose of calculating the Part 36 payment to treat the £7,500 of recoverable benefits as part payment of the whole of the appropriate damages figure of £10,000 in example (b) and £15,000 in example (c). This would have the effect of reducing the general damages recovered by the claimant in (b) to £2,500, and in (c) to £7,500.
22. The respondents, supported by the written submissions of the Secretary of State, nonetheless argue that the wording of Rule 36.23 is clear. The compensator is entitled to make a payment calculated on the basis of the inclusion of the total amount of the certificate, even if that produces a payment which is less than that which the claimant would be entitled to by way of general damages. Further the aggregate figure, that is the amount of recoverable benefit under the certificate and the payment is to be the sum used by the court to determine whether or not the compensator has "bettered" the sum awarded at trial for the purposes of the provisions as to costs. They acknowledge that the result is, in situations such as the present where the claim for lost earnings has been significantly reduced, an apparent breach of the principle that recoverable benefits should not impinge upon the claim for general damages. The remedy, it is submitted, is for the claimant, if the "gross sum" so calculated is sufficient to cover the claim, to accept the Part 36 payment, and to appeal in order to reduce the amount of the recoverable benefit which will then accrue to his or her benefit.
23. There is some superficial attraction in this argument. It requires the claimant to make a sensible assessment of his or her claim for, as in the present case, lost earnings and to accept the risk of appealing if he or she wishes to obtain full and proper compensation by way of general damages. In other words it encourages a claimant to make a realistic assessment of his or her claim, and to take a responsible attitude to the claiming of benefit. There is, it is conceded, the very real practical problem already mentioned of a claimant having to persuade a tribunal on appeal that he or she had been paid more by way of benefit than was attributable to the accident (and in some cases, therefore, more than should have been paid at all), leaving aside any problems relating to the risk that the Secretary of State might decide as a result to re-visit the decisions to award benefit, and seek recovery himself. Nonetheless, the respondents submit that this is a problem of the claimant's own making; and, in any event, the claimant has ex hypothesi received the money to which he or she claims she is entitled, albeit by way of benefit rather than by way of damages.
24. There are, it seems to us a number of difficulties with this solution. First, the Act is intended to set up a scheme for the recovery by the tax payer of benefits paid which had been the result of compensator's fault. It is not intended to provide an alternative means of compensating the claimant. The compensator remains primarily liable for the damage which has been caused to the claimant. The Act is not intended to distort in any way the litigants' or the court's approach to any claim. The second difficulty is that the test for entitlement to benefit may not in any given case be the same as the test applied by the court in awarding a relevant head of damage and therefore the amount of recoverable benefit under section 1(1)(b) of the Act. The third, and to our minds most serious difficulty is that the solution does not resolve the problem where damages in relation to a relevant head of damage are reduced by contributory negligence. As we have already said, there is no mechanism in the Act for taking into account a finding of contributory negligence. The compensator is required to pay the full amount on the certificate; and there is no appeal available either to the claimant or the compensator. Where, therefore, the certificate is for a sum which exceeds any realistic quantification of the relevant head of damage, the amount in the certificate is inevitably going to impinge on the general damages if the certificate is taken into account in full for the purposes of a Part 36 payment. That result cannot have been intended by Parliament.
25. Clearly, the problems which have been raised in the present case may only occur in a small albeit significant number of cases. A solution could, therefore, be found in the discretion given in Rule 36.20(2) that the normal order for costs need not be made by a court if "it considers it unjust to do so…"; but this is, as the appellants submit, an uncertain solution in an area where, if possible, there should be clarity to enable litigants to know the effect of any of the decisions they might have to make as a result of Part 36 offers or payments on any subsequent question of costs. The solution proposed by the appellant is that Rule 36.23(4) should read:

"For the purposes of Rule 36.20, a claimant fails to better a Part 36 payment if he fails to obtain judgment for more than the gross sum specified and in accordance with section 8 of the Social Security (Recovery of Benefits) Act 1997 in the Part 36 payment notice"

26. The effect, it is submitted, of inserting these words is that the gross sum specified is not the amount of gross compensation stated in the Part 36 notice, but the aggregate of the sum paid in, and the amount of the recoverable benefit which the compensator is entitled by section 8 of the Act to set off against the relevant head of damage. In other words, in the present case, the sum which would be used to calculate whether or not the appellant had bettered the payment is the aggregate of £10,000, the sum paid in, and £7,319.48p, which is the only amount awarded to the appellant against which the respondent is entitled to offset payment under the certificate. The effect would be that the appellant had bettered the Part 36 payment as the judgment in her favour was for £23,058.39p. and the burden would be on the respondents to appeal the certificate if they wished to recover the excess. This would be, it is submitted, in accordance with the principles and effect of the scheme of the Act.
27. In our view, this solution would produce a just result in the context of the scheme of the Act. As we have already said, the effect of the Act is that after a trial the compensator bears both the burden of meeting the whole of the compensation payment in the event of contributory negligence having an impact on the head of damage against which recoverable benefit can be set, and of appealing the certificate where ring fencing general damages have resulted in an apparent overpayment of benefit. We cannot see any justification for construing the effects of Part 36 in a way which distorts that effect. The compensator can be protected as to costs, which is the purpose of Part 36, by making an appropriate assessment of what is considered to be the proper sum for general damages, and any other sums against which the certificate cannot be set, then indicating the amount or proportion of the certificate which is to be taken into account for the purposes of the claims against which it can be set.
28. But it seems to us that that result cannot be achieved by the route suggested by the appellant. That requires reading into the rules words that are simply not there. However, the same result can be achieved at least to some extent on the wording of the rules as they stand. Rule 36.23(3)(b) requires the payment notice to state "the name and amount of any benefit by which that gross amount is reduced in accordance with section 8 and Schedule 2 to the 1997 Act". It follows that the calculations must be made in accordance with section 8; in other words, the amount by which the sum is reduced must be no more than the amount appropriate for the head of damages against which the benefits can be off-set. If that exercise is carried out properly by a compensator, resulting in an appropriate payment for general damages then the process of calculation of the Part 36 payment equiparates to the way in which damages would be awarded were the matter to go to trial in a way which makes sense of the primary rule as to costs contained in Rule 36.20. It also enables the claimant to make a properly informed decision on whether or not to accept the payment.
29. In the present case no attempt had been made by the respondents to carry out the exercise required by section 8 of the Act. They were clearly arguing that there was contributory negligence, and that the period for which they were liable for lost earnings was substantially shorter than that which the appellant was claiming. The effect of both these arguments was that the amount of the certificate was greater than the amount by which they could claim to be entitled to offset recoverable benefits against the overall damages awarded. Whilst, therefore, a literal reading of Part 36.20 and Part 36.23(4) would suggest that the judge's approach was correct, the Part 36 Payment had not been calculated in accordance with the rule. The amount of recoverable benefits had clearly not been "reduced in accordance with section 8 and Schedule 2 to the 1997 Act". It was not a proper and therefore effective Part 36 payment.
30. It follows that, in the present case, it would not have been necessary to look to the exercise of the court's general discretion in order to produce a just solution. Difficulties will, however, arise where a compensator has made an apparently appropriate calculation, or alternatively has provided information clarifying the offer or payment notice pursuant to a request under Rule 36.9, so that the payment could be said to have been properly made. In such a situation, it is possible that the compensator may have over estimated the period for which, for example, lost earnings would be awarded, and accordingly the amount of recoverable benefits to be offset against that, but underestimated the amount of general damages. A Part 36 payment based on those calculations would be in accordance with the rule, and could produce a gross sum which was greater than the sum awarded by the judge at a trial. In that situation, where the effect of the miscalculation by the compensator as to the relevant amount of recoverable benefits has impinged upon the general damages figure, it seems to us that justice requires the court to exercise its discretion under Part 36.20. The touch stone it seems to us, is that the claimant is entitled to the full value of his general damages claim. For the reasons we have given we do not consider that it is appropriate to require him or her to make up for any shortfall by appealing the certificate. It is for the compensator to make a proper assessment of the general damages figure and ensure that the Part 36 payment at least provides the claimant with that sum.
31. We are not fully confident that we have been able to identify every problem which may arise as a result of the interaction of the Act and the Rules; we did not have the benefit of full argument, for example, on the operation of the Regulations. But it is clear from what we have said that the Rules do not expressly take account of the various difficulties that we have identified. It seems to us that Part 36.23 may need reconsideration. Nonetheless, in the meantime, the approach we have identified above produces a workable solution consistent with the principles of the Act and with its practical application.
32. At one point, when the appeal first came before this court, the question arose as to whether or not a possible solution might be to defer the question of costs until after any appeal against a certificate had been heard, so that the full position could be considered by the court. In the present case, that was not possible, because the outstanding appeal meant that the claim had not been "finally disposed of" for the purposes of section 11(3) of the Act. That result could, however, have been achieved at first instance if the court had dealt with all matters except for costs. All relevant parts of the claim would therefore have been "finally disposed of" which could justify the conclusion that section11(3) of the Act provided no obstacle to any appeal against the certificate. However, that solution would involve inevitable delay and further expense, and does not seem to us to be the preferable solution whilst the Rules remain as they are.

Order: Appeal allowed.

Order as drawn by counsel.

Costs of the trial and of the appeal to be assessed on the standard basis until 28 November 2002 and thereafter on an indemnity basis to be subject to detailed assessment if not agreed.

Leave to appeal to the House of Lords refused.

(Order does not form part of the approved judgment)