England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM UPPER TRIBUNAL
(ADMINISTRATIVE APPEALS CHAMBER)
HHJ Turnbull

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th July 2013

Lady Justice Arden:

1. Housing benefit helps people on low income, or living on state benefits, to pay their rent. Council tax benefit also used to help people to pay their council tax until that benefit ended on 1 April 2013. Both benefits are means-tested so the local authority must calculate the income and capital resources of a person claiming either of these benefits (a "claimant") to see that is does not exceed a particular amount. For this purpose, certain sources of income must be left out of account. In this case, the appellant, Ms Geena Lloyd, applied to her local authority, the respondent ("Lewisham"), for both benefits. She disclosed her income, but failed to disclose an income loss award that she received of about £15,000 each year from a former employer following an injury at work. The particular feature of Ms Lloyd's income loss award is that her right to claim it formed part of her terms of employment and is thus "pre-injury" compensation, rather than compensation paid under an agreement made after she suffered her injury (which would be "post-injury" compensation). The principal issue on this appeal is whether Lewisham would in any event have been required under the relevant regulations to leave that type of income out of account.
2. Ms Lloyd has conducted her appeal in this court in person with great skill. After careful consideration I have decided that her appeal should be dismissed. I shall explain as clearly as I can why I have come to this conclusion.

How Ms Lloyd became entitled to her income loss award

3. Ms Lloyd was employed by the Metropolitan Police Service as a parking warden. In 1992, a member of the public assaulted her in the course of her work. She became ill and had to retire. Under her terms of employment, she then became entitled to be considered for a lump sum payment from the Metropolitan Civil Staff Superannuation Scheme ("the MCSS Scheme") to replace the income that she lost because of her injury. The trustees of the MCSS Scheme awarded her a sum to bring her income up to 85% of her pre-injury earnings, but (as they were entitled to do) they decided to convert the lump sum into an annual payment of approximately £15,000. I refer to this annual payment as Ms Lloyd's income loss award.
4. Ms Lloyd's income loss award is not, therefore, paid because she incurs any expenses, or suffers any pain or disability, as a result of her injury. The MCSS scheme later merged with the Principal Civil Service Pension Scheme ("PCSPS Scheme"). The PCSPS Scheme now pays Ms Lloyd's income loss award.
5. A further small amount became payable to Ms Lloyd as a result of early medical retirement. That is a separate matter and this appeal is not directly concerned with whether that sum formed part of her income for housing benefits purposes.
6. Ms Lloyd also received a small amount of compensation from the Criminal Injuries Compensation Board ("the CICB"). The CICB deducted from the compensation the income loss award which Ms Lloyd received from the PCSPS Scheme.
7. In 2000, Ms Lloyd applied to Lewisham for housing and council tax benefit. As mentioned, she did not disclose to Lewisham that she received income loss award. She was awarded both benefits.
8. In 2010, Lewisham discovered that Ms Lloyd was receiving her income loss award. It terminated her housing and council tax benefit and claimed that she had been overpaid housing benefit of £23,571.51p and council tax benefit of £4,185.77p. Lewisham contends that Ms Lloyd should have disclosed her income loss award when she applied for housing and council tax benefit. That is a serious matter but we are not concerned with the reasons why Ms Lloyd did not disclose this source of benefit.
9. I shall start by explaining the variety of forms of compensation that may be paid if a person is assaulted at work. I provide this explanation to show that there is an important distinction between Ms Lloyd's income loss award and other payments of compensation. This is relevant when I come to consider the parties' arguments below.

What claims may be made for compensation for an assault at work?

10. A person who is assaulted at work may become entitled to compensation from a number of sources. She may:

recover compensation from the person who committed the attack;

be entitled to compensation from her employer, or his insurer, if the employer was at fault;

be entitled to benefits under some scheme, like the MCSS scheme, which the employer has set up for the benefit of employees who are injured at work;

be entitled to an award of compensation from the CICB;

be entitled to state benefits; and

receive a sum from a charity.

11. There are also a variety of ways in which compensation can be paid. It may be:

• a lump sum;

• an amount paid on a regular basis, often under what is called a "structured settlement";

• regular payments under a trust, or an insurance policy, set up for the purpose, called an annuity.

12. The compensation may be paid voluntarily without the employee having to bring legal proceedings. If she has to go to court to establish her claim to compensation, the compensation will be paid under a court order. Alternatively, it may be paid under an out-of-court settlement, which is usually simply a form of agreement.
13. The compensation can include compensation for:

• pain and suffering;

• inability to do things now that she could do before the accident (which may be referred to as "loss of amenity");

• loss of earnings as a result of the injury; and

• expenditure as a result of the injury.

14. Normally, the state is able to "claw back" certain social security benefits paid in consequence of injury from the person paying the compensation. These include income support and job seeker's allowance, but not housing benefit (or, I will assume, council tax benefit). The current legislation is contained in the Social Security (Recovery of Benefits) Act 1997) (the "1997 Act"). The person paying compensation deducts state benefits from the compensation which he pays for the loss to which the benefit related (See Hodgson v Trapp [1989] AC 807). The state can only recover up to 5 years' worth of those benefits in this way from the person paying compensation. However, no deduction is made from any compensation for pain and suffering.
15. Ms Lloyd's income loss award does not fall into that category. It was made under her terms of employment. Naturally, these terms were agreed long before the injury. There is no suggestion that her employer was at fault in failing to protect her against her injury.
16. Because the income loss award was paid under the terms of an agreement which predated her injury, Ms Lloyd is in a better position than a claimant who received compensation under a payment or agreement for payment made after an injury is incurred. Her income loss award is not liable to be reduced by the amount of any state benefits she may receive because her income loss award is not a payment "in consequence of" any accident or injury or disease for the purposes of the 1997 Act. Such payments (excluding certain motor accidents payments) are limited to payments made "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" (1997 Act, section 1).

The relevant regulations dealing with the calculation of income

(a) Housing benefit

17. The Housing Benefit Regulations 2006 (2006 SI 213) ("the 2006 Regulations") set out entitlement to housing benefit. Part 6 of these Regulations provides for the calculation of a claimant's income and capital. Regulation 40 states in effect that, subject to provisions which do not apply here, income is not limited to earnings, but that income which is not earnings may be reduced under Schedule 5. Schedule 5 sets out the items of income which are to be disregarded.
18. As in the case of Ms Lloyd, compensation may sometimes be paid in the form of regular payments of income, rather than a lump sum. Payment of compensation in this way is in general excluded. The relevant part of the Regulations is paragraph 14(1) of Schedule 5. This provides for the following payments to be excluded from income:

"(1)     Subject to sub-paragraph (2) [which does not apply in this case], any of the following payments—

(a)     a charitable payment;

(b)     a voluntary payment;

(c)     a payment (not falling within sub-paragraph (a) or (b) above) from a trust whose funds are derived from a payment made in consequence of any personal injury to the claimant;

(d)     a payment under an annuity purchased—

(i)     pursuant to any agreement or court order to make payments to the claimant; or

(ii)     from funds derived from a payment made, in consequence of any personal injury to the claimant; or

(e) a payment (not falling within sub-paragraphs (a) to (d)) received by virtue of any agreement or court order to make payments to the claimant in consequence of any personal injury to the claimant."

19. This is a complex list of deductions which is clearly designed to take out of a person's income most compensation payments following personal injury. Sub-paragraph (c) was added after this court decided in Beattie v Secretary of State for Social Security [2001] 1 WLR 1404 that payments of compensation paid as income under an out-of-court settlement were payments of annuity which (under the 2006 Regulations as they then stood) had to be included in a person's income.

(b) Council tax benefit

20. The relevant regulations were the Council Tax Benefit Regulations 2006 (2006 SI 215). I do not need to set out the relevant parts of these Regulations separately as, so far as material, they are same: compare Regulation 30(1) and (2) of, and Schedule 4, paragraph 15 to these Regulations with Regulation 40 (1) and (2) of, and paragraph 14 of Schedule 5 to, the 2006 Regulations.

Ms Lloyd's unsuccessful appeals to the First-tier and Upper Tribunals

21. Ms Lloyd exercised her right to appeal to the First-tier Tribunal ("the FTT") from the decision of Lewisham to terminate her housing and council tax benefit. She contended that her income loss award should be left out of account. The FTT dismissed her appeal. She then appealed to the Upper Tribunal. The Upper Tribunal also dismissed her appeal.
22. In the Upper Tribunal, HHJ Turnbull concluded that he could not distinguish this case from the decision of this court in an earlier case, Malekout v Secretary of State [2010] EWCA Civ 163. This decided, for the purposes of a similarly-worded provision concerning income support that, where an employee received from his employer an early ill-health pension in consequence of an injury to him, this had to be taken into account when determining the employee's income. Thus the Upper Tribunal held that Ms Lloyd's income loss award could not be left out of account.
23. Mr Giles Robertson, instructed by the Free Representation Unit, appeared pro bono for Ms Lloyd before the Upper Tribunal, and the Upper Tribunal paid tribute to his "thorough and able argument". He made a number of submissions. Among these he submitted that Ms Lloyd's income loss award was a payment of compensation and thus distinguishable from the payment of an early retirement pension,which had been the subject-matter of the decision in Malekout. He also contended that Malekout should not be followed because in Malekout this court should have considered the equivalent of Regulation 41(5) of the Housing Benefit Regulations. This, he contended, should have led the judge to conclude that only the payment had to be subsequent to the injury and not the agreement (I shall explain this case in more detail in paragraphs 28 to 30 below).
24. The judge noted that income was disregarded if paid as part of an out-of-court settlement but not if paid by the employer under a pre-injury agreement. However, he held that it would have made no difference if Ms Lloyd had had to take judicial review proceedings to obtain an order of the court against her employer to make a payment in her favour. In his judgment, the order of the court would not have brought her income loss award within paragraph 14(1)(e) because, in substance, her right derived from the MCCS Scheme, which the court order merely enforced.

Summary of my conclusion that Ms Lloyd's income loss award is not to be left out account and my reasons for that conclusion

25. I shall set out Ms Lloyd's arguments in more detail below, together with those of the Secretary of State, who has intervened in these proceedings following the decision of Lewisham not to oppose the appeal.
26. As explained, the distinguishing feature of Ms Lloyd's income loss award is that it is compensation paid to her under her terms of employment. In summary, I consider that paragraph 14(1)(e) only excludes sums paid under agreements which are made after the injury occurs. I accept that we are not strictly bound by Malekout to reach this conclusion but its reasoning is highly persuasive. In my judgment, its conclusion accords with the natural reading of paragraph 14(1)(e). In addition, there is rational distinction in this context between payments made under pre-injury agreements, such as the MCSS Scheme and payments made under a court order or out-of-court settlement of a claim. Indeed, in my judgment, it would be irrational for the 2006 Regulations to leave Ms Lloyd's income loss award out of account in determining her income. I develop these reasons below.

(1) Malekout not binding but highly persuasive

27. This court is bound in general to follow decisions on the same point already made by this court. This is well established and helps to ensure certainty in the law and its orderly development. Ms Lloyd submits that this general principle does not apply to Malekout. Miss Zoe Leventhal, for the Secretary of State, submits that Malekout is binding on us so as to require us to dismiss the appeal on that ground. I shall next resolve this conflict between the parties' submissions.
28. Malekout concerned a different social security benefit, namely income support, which is subject to a separate statutory scheme. In Malekout the claimant was employed as a dentist under a NHS scheme with similar provisions. He suffered a neck injury through an accident at home and retired early on medical grounds. He received a reduced pension and the question was whether this should be disregarded under the relevant regulations relating to income support, which is set out in the judgment and is to all intents and purposes the same as paragraph 14(1) of the 2006 Regulations.
29. Sir David Keene, with whom the Chancellor and Moses LJ agreed, held at paragraph [10] of his judgment that the early retirement pension was not "received by virtue of any agreement" (the same form of words as in paragraph 14 (1)(e)) because the "agreement" had to be made after the injury in order to constitute an agreement "in consequence of any personal injury". This followed from the statutory context because:

i) subparagraphs (c) and (d) addressed the situation where the claimant had been injured and the compensation was put into a trust or used to purchase an annuity. That indicated that subparagraph (e) dealt with the situation where a similar payment was made, but not from a trust or an annuity;

ii) the expression "agreement or court order" indicated an agreement reached instead of a court order, after the injury had occurred, rather than some earlier contractual arrangement;

iii) a normal occupational pension (that is, a pension paid by an employer on retirement) would in general constitute income and would not be left out of account;

iv) There were express provisions for pensions to be left out of account in the same schedule; and

v) there was no reason why a retirement pension, paid earlier following injury, should be left out of account and treated differently from a normal retirement pension.

30. Malekout construed the same wording as in paragraph 14(1)(e) but in the context of another benefit. In my judgment, Ms Lloyd is right to say that strictly we are not bound by it. This court has to decide what paragraph 14(1)(e) means in the context of housing benefit. However, the two Regulations cover similar subject-matter and so the discussion in Malekout is highly persuasive. It is likely that this court would only depart from it if it overlooked some relevant legal rule (when it is said to be decided per incuriam) or if some other Regulations alter the effect of paragraph 14(1)(e).
31. Ms Lloyd repeats an argument made by Mr Robertson to the Upper Tribunal that Malekout was decided per incuriam because this court failed to take into account Regulation 41(5) of the 2006 Regulations. She submits that this Regulation, in providing for the circumstances in which capital is to be treated as income, makes it clear that, where there is an agreement or order for the payment of income, the words "in consequence of" the injury qualify the payments and not the agreement. Regulation 41(5) provides:

"41  Capital treated as income

(1)     Any capital payable by instalments which are outstanding at the date on which the claim is made … shall, if the aggregate of the instalments outstanding and the amount of the claimant's capital … exceeds £16,000, be treated as income….

(5)     Where an agreement or court order provides that payments shall be made to the claimant in consequence of any personal injury to the claimant and that such payments are to be made, wholly or partly, by way of periodic payments, any such periodic payments received by the claimant (but not a payment which is treated as capital by virtue of this Part), shall be treated as income."

32. I will assume in Ms Lloyd's favour that Regulation 41(5) bears a different meaning from that given by this court in Malekout to the equivalent in that case of paragraph 14(1)(e). I accept that one would expect the provisions for disregarding capital and income to complement each other. Even so, it does not follow that this court in Malekout was wrong to reach its meaning. For an omission to consider a particular provision to result in a decision being per incuriam it must be shown that the provision means that the conclusion that was reached cannot stand (see Morelle v Wakeling [1955] 2QB 279). Regulation 41(5) is dealing with similar subject-matter but it is differently worded. It is possible, though not inevitable, that paragraph 14(1)(e) has a different meaning. For my own part, I doubt whether Regulation 41(5) would be interpreted in the way I have assumed but I need not decide that point.
33. Ms Leventhal submits that Malekout is binding because the ratio of the decision is that the words "in consequence of" qualify "agreement" and not "payment". She points out that there was also an injury award from the employer in issue in Malekout and she submits that this was a payment of compensation just as Ms Lloyd submits that the income loss award was a payment of compensation. But these submissions do not meet the point that Malekout was a decision on a different statutory provision. Even though the wording of the particular provision was the same, the decision in Malekout is not strictly binding on us. As I have said, the reasoning is highly persuasive and likely to be followed. However, to satisfy myself that it should be followed in relation to the 2006 Regulations, I must consider the meaning of paragraph 14(1)(e) for myself.

(2) The natural reading of paragraph 14(1)(e) is consistent with Malekout

34. The language of paragraph 14(1)(e) is not clear. In those circumstances, it is the responsibility of the court to decide whether the words "in consequence of any personal injury to the claimant" are to be read as referring to the agreement, so that what matters is that the agreement was made after the claimant suffers injury. Alternatively, those words could refer to the payment that the agreement or court order requires to be made. In that case, it does not matter when the agreement was made. This is the meaning which Ms Lloyd supports. The agreement could then, as in this case, have been made long before the injury occurs. All that has to take place after the injury is the making of the payments.
35. The words "in consequence of" are nearest to the word "payments". That point supports Ms Lloyd's interpretation. However, as this court pointed out in Malekout, the context suggests otherwise, since paragraph (c) and (d) both deal with cases where the trust fund must have been set up, or the annuity purchased, after the date of the injury. Moreover, the expression "agreement or court order" in sub-paragraph (d) suggests that the type of agreement to which paragraph 14(1) refers is an out-of-court agreement to settle the compensation claim. That would be one after the date of the injury and would not include an agreement made previously simply in contemplation that an injury might occur.
36. These points do not determine this case for one, if not two, reasons. First, as part of the process of finding the right meaning the court has to consider whether the natural reading leads to a coherent provision. I consider this under my next reason and conclude that it does. Second, the court may have to ask that question for a second reason. The right to receive a welfare benefit constitutes a possession for the purposes of Article 1 of the First Protocol to the European Convention on Human Rights (Stec v United Kingdom ...App no 65731/01)). Therefore, if the position is that the state is drawing an unfair distinction between the persons who receive injury benefits from their employers and other claimants, then the court may conclude that the rules do not comply with Ms Lloyd's Convention rights under Article 1 read with the Article 14 of the Convention, which prohibits discrimination. Fairness involves the court determining whether the distinction can be justified as a proportionate rectification on each group's rights. As this second reason was not argued, I shall not decide whether it arises but assume in Ms Lloyd's favour that it does arise, as I have come to the conclusion that there is in any event a rational distinction between payments to the two types of claimants. Indeed I have come to the view that it would have been irrational for the 2006 Regulations not to have treated Ms Lloyd's income loss award as part of her income.

(3) It would be irrational for Ms Lloyd's income loss award to be left out of the calculation of her income for housing benefits purposes

37. This brings me to the arguments that Ms Lloyd has mainly emphasised. She submits that the result of the interpretation in Malekout is to produce an absurdity. She submits, repeating a submission first made by Mr Robertson, that the court should consider three different types of compensation where a person in the course of their employment is assaulted by another. She or he may obtain:

damages from the attacker. These are disregarded under Schedule 5, paragraph 14 (income), or Schedule 6, paragraph 14A (capital).

compensation from the CICB. This is disregarded under Schedule 6, paragraph 14A.

a benefit from her employer, such as Ms Lloyd's income loss award. These will be deducted from compensation paid by the CICB and, on the basis of the Upper Tribunal's decision, will not be disregarded for the purposes of housing and council tax benefit. Ms Lloyd's case is that this is illogical.

38. Ms Lloyd emphasises that her income loss award was compensation for loss of income. Therefore, she submits, her case is different from that in Malekout, which concerned an occupational pension scheme. Moreover, she submits that she was disadvantaged because her awards from her employer reduced her CICB compensation, and it is illogical for her CICB compensation then to be disregarded but not her awards from her employer.
39. Ms Leventhal submits that, under paragraph 14(1)(e), the agreement for compensation must be one made after the personal injury has been incurred. She submits that the distinction is a rational one because on her submission:

the legislative intention of the scheme is that no one should recover double payment. She submits that Ms Lloyd's income loss benefit received replaces her income. It is not damages for pain and suffering. It therefore falls outside paragraph 14(1)(e) like the occupational pension in Malekout.

The Secretary of State cannot recover any social security benefits from Ms Lloyd's employer under the 1997 Act, which, as I have explained above, she could do if the compensation was damages paid by a wrongdoer.

the disregard of CICB compensation is not illogical because social security benefits would be deducted from it.

40. Ms Leventhal initially submitted that the legislative intent of paragraph 14 was to exclude occupational scheme payments on the basis of some communications between the Secretary of State and the Social Security Advisory Committee ("SSAC"). The SSAC was set up pursuant to statute and its approval of changes in certain welfare benefits is required before statutory instruments can be made. It is therefore an important body and the court would no doubt be assisted by its views in an appropriate case. However, in this case, the communications were private communications as the SSAC had not been asked to prepare a formal report. Ms Leventhal properly withdrew her reliance on these communications when that became clear in answer to a question from Jackson LJ in the course of the hearing.
41. In addition, the policy described by Ms Leventhal was not, in my judgment, clearly stated in the communications. What is stated is that it is the long-standing policy of the Secretary of State in relation to income-related benefits to disregard any payment made "in consequence of a personal injury" to a claimant or a member of his family provided that the capital is held in trust. This proviso has been extended to permit the payments to be made, for instance, under a structured settlement. That confirms what is already apparent from the 2006 Regulations themselves but, as the communications were private communications, I rely for that conclusion on the 2006 Regulations. The private communications may not be used to influence the court. The communications are, moreover, silent as to any distinction between sums paid under out-of-court settlements made after an injury has occurred and sums paid under pre-injury contractual schemes.
42. In summary, Ms Leventhal submits that the Secretary of State has drawn a rational line between on the one hand occupational pension schemes and on the other hand compensation for personal injury, whether or not this includes compensation for loss of earning capacity. The basis of this distinction is, she submits, that those awarded personal injury damages are likely to incur special expenses and that they therefore have to be treated differently.

Discussion

43. It is necessary to decide at the outset on the correct approach to finding the meaning of paragraph 14(1). If a claimant is entitled to a benefit, the court will uphold that entitlement, but here the provision for calculating Ms Lloyd's income, and particularly whether it includes an income loss award, is not clear. The court cannot simply resolve that doubt in favour of the claimant. It must determine what the provision means.
44. In my judgment, the meaning of paragraph 14(1)(e) of Schedule 5 in the 2006 Regulations is to be found in the light of its function and the context in which it appears in the statute-book. The context is one of determining the income of the claimant for the purpose of deciding whether the claimant should have a state benefit. As I said at the outset, this benefit is intended to help those on low incomes or living on state benefits to pay their rent and council tax. This is clear from the 2006 Regulations read as a whole. The court should also in my judgment live in the real world and work on the basis that the state's resources available for claimants are not infinite but limited. This has an impact on how the court approaches the task of finding the meaning of a provision which treats items of income of a claimant as not being income. It means, as I see it, that the proper approach is to seek to ascertain from the admissible material the reason justifying the various meanings of a particular exclusion. If the court finds that there is no rational reason for a wide meaning, it should, all other things being equal, choose the narrower meaning and vice-versa.
45. We are faced with choosing between a wide meaning and a narrow meaning of paragraph 14(1)(e). The wide meaning, for which Ms Lloyd contends, would have the effect that paragraph 14(1)(e) would include payments made after the injury but pursuant to agreements or orders made at any time, thus including payments pursuant to occupational pension schemes. The Secretary of State argues for the narrow meaning, being that given to the equivalent of this provision in Malekout, namely that the agreement or order must have been made after the injury.
46. Paragraph 14(1) must be examined for the purpose of finding the function of the various sub-paragraphs.
47. In the case of paragraph 14(1)(a) and (b), it is easy to see that the state would not wish to take credit for charitable payments and voluntary payments. That would be to take unfair advantage of, for example, the charity.
48. Paragraph 14(1)(c) and (d) deal with payments from trust funds set up, and annuities purchased, out of compensation for an injury. Paragraphs 13 and 14 of Schedule 6 of the 2006 Regulations give special protection to the capital element of trust funds created, and annuities purchased, from compensation payments. Both the value of the right to receive the annuity and the value of the right to receive any payment under the trust are disregarded. Likewise, when derived from compensation paid for personal injury, the capital in the trust is disregarded. Moreover, paragraph 14A of Schedule 6 gives the person receiving compensation a year in which to transfer a lump sum into a trust. During that year, his compensation is not treated as income. It would be illogical for paragraph 14 to treat as income payments under annuities paid, or trust funds created, from compensation for personal injury for which Schedule 6 provides this special protection.
49. However, it would in my judgment be illogical for paragraph 14(1)(e) to give protection to sums clearly paid to replace income. The whole purpose of the exercise is to calculate income. To give paragraph 14(1)(e) the wider meaning of including agreements made before the injury occurred would mean that the exclusion would lack a rational basis. It would effectively allow double recovery of income by Ms Lloyd. She could receive income in the form of an income loss award from her employer and also housing and council tax benefit calculated on the basis that that income had not been replaced.
50. Moreover, there are distinctions between the cases of compensation which Ms Lloyd argues are analogous to her own case, and her own income loss award. Where compensation has been ordered or agreed after an injury, much of the compensation will have been for pain and injury, loss of amenity and medical and other expenses. It would hardly be rational or fair for the Secretary of State to treat these items as income. In contrast to compensation for loss and injury, loss of amenity and medical and other expenses, Ms Lloyd's income loss award is paid exclusively for loss of income.
51. In theory, the Secretary of State could require the amounts paid under the various heads of compensation, for example, the amount paid for pain and suffering, to be identified. But the Secretary of State would then have to check this. There is an obvious risk here that, as a practical matter, it may be both difficult and costly for the Secretary of State to be satisfied as to the amount paid for loss of earning capacity and loss of earnings from that paid for other reasons. Difficulties and expense of administration are real considerations in the field of social security. It is sufficient in this context to say that that is possible that verification will be difficult and costly. Courts, when establishing the law, of necessity often work on the basis of difficulties or costs which they consider will be incurred without having evidence about this: see for example: Morelle v Wakeling, above, at page 406. There will be other, more marginal situations when the court is considering the proportionality of limits on benefits when the court will need to be satisfied by some evidence from the Secretary of State as to the likelihood of difficulty or cost.
52. Another factor which distinguishes Ms Lloyd's income loss award from that of compensation paid after an injury is that the 1997 Act does not apply to it: see paragraph 14 above. This has implications both for public resources and for Ms Lloyd. It means that she may receive more than other claimants because she has not had to suffer the deduction of any state benefits and the state will not have the benefit of any "claw back". We do not have evidence which quantifies the effect of this difference. Does that mean that we cannot be satisfied in this case that this leads to a real and justifiable distinction between the two groups of claimants? In my judgment, the answer to that question is no. I consider we can and should be satisfied that the distinction is real and justifiable. The amount of the difference for a claimant with "pre-injury" compensation, as compared with that for a claimant with "post-injury" compensation, is bound to vary from case to case. But there is bound to be an impact even if we cannot quantify it ourselves. We have no reason to suppose that the difference is insignificant.
53. The fundamental question with which paragraph 14(1) deals is how social security benefits should be allocated among different groups of claimants in a world of finite resources on which there are many competing demands. In this context, the court should in my judgment give weight to the view of the legislator, which is reflected in the 2006 Regulations, unless there is good reason not to so do. There is no such reason in this case. Accordingly, we should proceed on the basis that the deduction of social security benefits and the claw back in the 1997 Act makes sufficient difference to justify the 2006 Regulations treating pre-injury compensation on a different basis from post-injury compensation.
54. There is a further factor. The amount of compensation paid after an injury will be the product of negotiation. The wrongdoer has to pay no more than is necessary to make good the loss caused by the injury. The MCSS Scheme is discretionary and so the trustees will have carefully considered the appropriate amount, but they are unlikely to have been as hard-headed as the wrongdoer or his advisers and insurers.
55. There is, in my judgment, nothing in the point that the distinction is illogical because Ms Lloyd could have obtained an order of the court against the trustees of the MCSS scheme and, if she had done so, her income loss award would have fallen within paragraph 14(1)(e). As the Upper Tribunal held, the payment would still in substance have been under the MCSS scheme.
56. Ms Lloyd makes the point that her injury award under the MCSS Scheme was reduced by her income loss award and so she could have received a larger injury loss award but for her income loss award. We are not concerned with that award and anything I say about it does not form a binding part of this decision. However, in the absence of further argument, I do not consider that the result would have been any different if we had been concerned on this appeal with that award rather than the income loss award. Ms Lloyd was entitled to be considered for these awards because of the terms of her employment, not by virtue of an agreement entered into after the injury. It follows from this that "pre-injury" compensation will be treated as income and not excluded by paragraph 14(1)(e) even if it does not replace income but provides compensation for some other loss. This may be a loss which, had it formed part of an out-of-court agreement, would have been left out of account for housing and council tax benefit purposes. This could include, for example, compensation for pain and injury, loss of amenity and medical and other expenses. However, the point remains that it may well be difficult and costly for the Secretary of State in being satisfied as to the elements of the compensation. In addition, the further points made in paragraphs 50 to 52 apply, and these also distinguish the compensation from "post-injury" compensation.
57. I would therefore dismiss Ms Lloyd's appeal on the principal issue. Under the 2006 Regulations pre-injury compensation forms part of the claimant's income and is not left out of account for housing and council tax benefit purposes.

Subsidiary argument regarding a new agreement after the date of Ms Lloyd's injury

58. Ms Lloyd ran a further argument that there was a new agreement made when she was sent notice of the award of her benefit. The Upper Tribunal rejected this argument. The judge held that any agreement for payment of her income loss award merely gave effect to the MCCS Scheme. It was irrelevant that the payment was discretionary.
59. Ms Leventhal submits that this argument should be rejected for the reasons given by the Upper Tribunal.
60. I agree with Ms Leventhal's submissions. The mere fact that the form for accepting the award contained conditions, some new, does not in my judgment mean that the income loss award was paid by virtue of a new agreement. The amount of the income loss award was, for instance, calculated in accordance with the terms of the MCSS Scheme. I would therefore reject this ground of appeal.

Conclusion

61. For the above reasons, I would dismiss this appeal.
62. I would like to add that in an earlier judgment, SB ...(Pakistan) v Secretary of State for the Income Department (Appeal No. 1AS/01696/2010)), I said that an applicant in the Immigration and Asylum Chambers should apply to the Free Representation Unit to see if it is possible to have some assistance on a pro bono basis. I should have said the Bar Pro Bono Unit. The Free Representation Unit works exclusively in the areas of social security and employment, particularly in the tribunals. This case shows how the arguments put forward by advocates who generously act on this basis can greatly assist in the resolution of some difficult questions.

Lord Justice Jackson:

63. I agree.

Lord Justice McCombe:

64. I also agree.