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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Cantwell v. Criminal Injuries Compensation Board (Scotland) [2001] UKHL 36 (5th July, 2001)
URL: http://www.bailii.org/uk/cases/UKHL/2001/36.html
Cite as: 2001 GWD 24-879, 2002 SC (HL) 1, 2001 SLT 966, [2001] UKHL 36, 2002 SCLR 185

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Cantwell v. Criminal Injuries Compensation Board (Scotland) [2001] UKHL 36 (5th July, 2001)

HOUSE OF LORDS

Lord Bingham of Cornhill Lord Steyn Lord Hope of Craighead Lord Hobhouse of Wood-borough Lord Scott of Foscote

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

CANTWELL

(RESPONDENT)

v.

CRIMINAL INJURIES COMPENSATION BOARD

(APPELLANTS)

(SCOTLAND)

ON 5 JULY 2001

[2001] UKHL 36

LORD BINGHAM OF CORNHILL

My Lords,

1. I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Hope of Craighead. I gratefully adopt, and need not repeat, his most helpful review of the facts and issues in this appeal.

2. The Criminal Injuries Compensation Scheme 1990 was an extra-statutory scheme for compensating victims of crimes of violence. Its object was to put qualifying victims in the same position financially as they would have been in had they not been injured but not to make them better off. Paragraph 12 of the scheme provided for the assessment of compensation on the basis of common law damages (subject to the other provisions of the scheme), and common law damages for personal injuries are intended to compensate, not enrich. On this short ground the decision under appeal appears anomalous. From his normal date of retirement Mr Cantwell lost the retirement pension which (but for his injury) he would have drawn; he gained an ill-health pension which (but for his injury) he would not have drawn. If, as the First Division held, he is to be compensated for loss of his retirement pension after his normal retirement date without giving credit for his ill-health pension received during that period, there being only £1,500 per annum difference between the two, he will be much better off financially than if he had never been injured. This anomaly was fully recognised by the First Division, which described its decision as "inequitable", but the court felt constrained to decide as it did by section 10(a) of the Administration of Justice Act 1982, which Lord Hope has quoted and which, in the court's view, needed amendment.

3. On a straightforward application of the approach indicated in Parry v Cleaver [1970] AC 1, Mr Cantwell would have been required to give credit for his ill-health pension received after his normal retirement date, since this would have involved an appropriate comparison of pension with pension, like with like. This was the approach adopted by a majority of the Criminal Injuries Compensation Board and upheld by the Lord Ordinary. Since Parry v Cleaver was treated as authoritative in England and Wales and was, as I understand, regarded in Scotland as an accurate reflection of Scots legal principles, this ruling would appear to have been sound in principle and just in its practical outcome.

4. The issue in Parry v Cleaver, however, concerned the proper treatment of a police officer's ill-health pension received before his normal date of retirement, and it was ruled that no account should be taken of this in calculating his loss up to that date. That is not a result for which either party to this appeal contends. The Board ruled in the present case that in calculating Mr Cantwell's loss until his date of normal retirement there should be deducted one half of the value of the ill-health pension he had received up to that time. That decision was not challenged by either party before the Lord Ordinary, the First Division or the House. It was plainly based on paragraph 20 of the scheme, which Lord Hope has quoted. That paragraph did indeed provide for the deduction of half of any taxable "pension accruing as a result of the injury". The parties are agreed that this description covered Mr Cantwell's ill-health pension received up to his normal retirement date. It might be thought to cover Mr Cantwell's ill-health pension received after his date of normal retirement also since paragraph 20 drew no distinction between pensions received before and after the applicant's date of normal retirement. The contention that paragraph 20 governed Mr Cantwell's entitlement after as well as before his date of normal retirement was however rejected by a majority of the Board, the Lord Ordinary and the First Division, and has not been repeated in the House. It is accordingly not open to review. But one can understand why a minority of the Board saw logical force in this contention.

5. Although the First Division reluctantly treated section 10 of the 1982 Act as determinative of the appeal to it, this section was not mentioned by the Board in its judgment and the Lord Ordinary agreed with the submission on behalf of the Board that

If, as I understand, Parry v Cleaver was or would have been accepted as accurately reflecting the principles of the Scots common law, and if section 10(a) did not alter the Scots common law, one is bound to wonder why the provision was enacted at all and why it was enacted in terms which led the First Division to put upon it the construction which, not to my mind surprisingly, it did. The best efforts of counsel have done little to dispel this mystery. The report of the Scottish Law Commission to which Lord Hope refers gives no hint of an intention to depart from Parry v Cleaver, but nor does it identify any omission or anomaly which section 10(a) could have been intended to address. If section 10(a) was enacted for the avoidance of doubt it has not proved notably successful.

6. It seems clear from references which Lord Hope has given that in the period of nearly twenty years since section 10(a) was enacted it has not been understood to have the effect which the First Division has given to it in this case. Yet many claims relating to pension loss after the date of normal retirement must have been disposed of during that period, presumably according to conventional Parry v Cleaver principles. Lord Hope has shown how section 10(a) may be read conformably with those principles. Since those principles, when applied to the post-normal retirement period, yield what is to my mind a just result, and since no reason has been shown why section 10(a) should have been intended to yield a different result in a case such as this, I am happy to concur in making the order which Lord Hope proposes.

LORD STEYN

My Lords,

7. I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill, Lord Hope of Craighead and Lord Hobhouse of Woodborough. For the reasons they have given I would also make the order which is proposed.

LORD HOPE OF CRAIGHEAD

My Lords,

8. This case raises a short but important point relating to the calculation of the amount of damages for personal injury. Although it takes the form of a dispute between the injured party and the Criminal Injuries Compensation Board as to whether compensation is available to the injured party under a scheme for compensation which is administered by the Board, the case is of much wider interest. This is because the decision which your Lordships are being asked to take will affect the calculation of damages for personal injury in all cases on similar facts in the ordinary courts in Scotland.

9. On 21 May 1992 the respondent Ian Cantwell was assaulted in the course of his duty as a police officer. The injuries which he sustained were such that on 1 June 1993 he had to retire on medical grounds from the police force. In normal course he would not have retired until 16 April 1996. On taking early retirement he became entitled to an ill-health pension under the Police Pensions Regulations 1987 (SI 1987/257), as amended by further regulations in 1990 (SI 1990/805) and 1996 (SI 1996/867). He commuted part of that pension into a lump sum. The remainder took the form of a continuing annual pension, which is taxable. But he lost his entitlement under the 1987 Regulations to a retirement pension on reaching his normal retirement age. Their Lordships were told that in round figures the sum which the respondent has received since his retirement date by way of ill-health pension is £13,700 per annum. If he had continued in service to his normal retirement age he would have received a retirement pension of £15,200. It should be noted that, although the two pensions are distinguished from each other in the 1987 Regulations by means of a different adjective, they are both pensions and they are both products of the same scheme.

10. The respondent applied for compensation to the Criminal Injuries Compensation Board. The function of the Board is to decide what compensation should be paid to the victims of crimes of violence under a scheme known as the Criminal Injuries Compensation Scheme. The Scheme has now been superseded by new arrangements, and it is in the course of being wound up. But the Board continues to deal with applications which were lodged under the Scheme, and the respondent's application falls into that category. Paragraph 5 of the Scheme provides that compensation will not be payable unless the Board are satisfied that the injury was one for which the total amount of compensation payable after deduction of social security benefits, but before any other deductions under the Scheme, would not be less that the minimum amount of compensation, which shall be £1,000. Paragraph 12 states that, subject to the other provisions of the Scheme, compensation will be assessed on the basis of common law damages.

11. The respondent's application for compensation was refused by a single member of the Board, Mr Crawford Lindsay QC, on 28 September 1995 on the ground that, taking account of the benefits, past and future, which would have to be deducted under the Scheme, the sum which the respondent would be awarded was below £1,000. The respondent applied for a hearing, which took place in Glasgow before five members under the chairmanship of the Chairman of the Board, Lord Carlisle of Bucklow QC. On 17 July 1997 the Board issued a judgment in which the decision of the single member was confirmed.

12. The proper treatment of the respondent's claim for loss of pension was the critical issue which the Board had to decide. Paragraph 20 of the Scheme provides:

13. It was common ground that the respondent's ill-health pension under the Police Pensions Regulations is a "pension" within the meaning of paragraph 20 of the Scheme. It appears that under these Regulations there is no pension fund as such. But was accepted that the pension payments to which police officers are entitled under the Regulations are not of such a kind that they were to be regarded as accruing solely as a result of payments by the victim. It was agreed that the case is to be treated in the same way as if there had been a fund to which the respondent contributed and the remainder necessary to pay the benefits had been paid by the police authority. So the ill-health pension is not excluded from the ambit of the Scheme by the last sentence of paragraph 20. The respondent paid weekly contributions to the police authority. The amount of the pension which he received was related to the total amount of the contributions paid by him during his period of service.

14. The decision of 17 July 1997 was a majority decision, as appears from the last three paragraphs of the judgment in which the Board said:

15. It is not disputed that, if the majority view is correct, the sum which the respondent would have been awarded under the Scheme would have been less than the minimum award of £1,000. But the respondent was not content with this decision. He presented a petition for judicial review to the Court of Session in which he sought reduction of the decision of the single member and the decision of the Board by which the decision of the single member was confirmed. On 28 July 1998 the Lord Ordinary (Lord Milligan) refused the prayer of the petition. On 9 February the First Division (the Lord President (Rodger), Lord Coulsfield and Lord Cowie) allowed the respondent's reclaiming motion, reduced the decision of the Board and remitted the respondent's application to the Board for reconsideration: 2000 SC 407.

The issue

16. As Mr Campbell QC for the appellants said in his opening remarks, the question in this appeal relates to the characterisation of a claim for loss of pension. The respondent's claim for compensation included as one of its elements a claim that he had been denied the opportunity of increasing his pension entitlement by continuing to work until he reached the normal retirement age. The question is whether, in assessing the amount to be paid for this part of his claim of damages, account should be taken of the amount of the ill-health pension payments which he has received and will continue to receive after reaching that age.

17. The Lord Ordinary said that in his view there was much to be said for the view that, taking the words of paragraph 20 of the Scheme according to their plain and ordinary meaning, any deduction in respect of the respondent's pension benefits for the period following normal retirement age should be in respect only of one half of the value of those benefits. But he found what he considered to be sound reasons for construing the relevant sentence of that paragraph as applying only where the common law basis of assessment did not already provide for deduction of those benefits in full. He also rejected an argument which had not been put to the Board that the effect of section 10(a) of the Administration of Justice Act 1982 was that the ill-health pension should be left out of account altogether in assessing the amount of the respondent's claim.

18. The opinion of the First Division was delivered by Lord Coulsfield. He dealt first with the relevant provisions of the Scheme. He said that the court were of the opinion that the correct view was that they were designed to regulate the position before normal retirement, and that they agreed with the Board and the Lord Ordinary on this point: p 717B-C. He then proceeded to consider the wording of section 10 of the Administration of Justice Act 1982. He noted what was said in Parry v Cleaver [1970] AC 1 about the proper treatment of pensions for the period of retirement in English law, and the argument that a comparison of an ill-health pension with a retirement pension was a comparison of like with like which showed that a deduction could properly be made in assessing post-retirement loss. But he concluded that section 10(a) of the Act excludes any deduction in respect of a contractual benefit such as the benefit in issue in this case, whether that benefit relates to a period before or after normal retirement date: p 418A-B. He said that the court had considered very carefully whether any other meaning could properly be given to the statutory words which would lead to a different result, but that it had been unable to do so: p 418C.

19. It is clear from Lord Coulsfield's concluding remarks that the court reached its decision with reluctance, as it was well aware that the result was in conflict with the position in England and that it was inequitable. The issue in this appeal is whether that decision was inevitable. If another solution to the problem of interpretation can be found which produces a result which is equitable and in accordance with principle, it should of course be adopted. It should be noted however that the respondent did not seek to challenge the court's decision that the provisions of paragraph 20 of the Scheme were designed to regulate the position before the retirement date and that they did not relate to the calculation of pension loss after that date.

20. Section 10 of the Administration of Justice Act 1982, as amended by the Jobseekers Act 1995 and the Employment Rights Act 1996, provides:

Employment Rights Act 1996

section 135

Jobseekers Act 1995

21. The 1982 Act followed a report of the Scottish Law Commission on the "Admissibility of Claims for Services and Admissible Deductions" in damages for personal injuries: Scot Law Com No 51 (1978). A draft bill was appended to that report. Part II of the 1982 Act, which deals with damages for personal injuries in Scotland, is based almost entirely on the wording of the draft bill. In paragraph 4 of its report the Scottish Law Commission said that their concern had been to identify what anomalies or uncertainties exist within the present framework of law relating to damages for personal injuries. In paragraph 5 they said that in their review of this branch of the law they had sought, among other things:

…

In paragraph 47 they said that in their approach to the problem of deductions they had taken for granted the general principle of the Scots law of reparation that damages are intended to be compensatory. In the light of this background it is appropriate first to consider how the common law stood as regards the question of post-retirement pension loss before dealing with the problem as to how section 10 of the 1982 Act should be interpreted.

The common law prior to the 1982 Act

22. The guiding principle in Scots Law, as the Scottish Law Commission observed in their report, is that damages for personal injury are intended to be compensatory. The principle is that the compensation which the injured party receives by way of the sum of money as damages should as nearly as possible put him in the same position as he would have been in if he had not sustained the wrong for which he is to be compensated: per Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 7 R (HL) 1, 7. The compensatory approach requires like to be compared with like. The nature of the loss for which the injured party seeks to be compensated must be identified. If it can be shown that he has received, or will receive, a benefit which is of same as that which he has lost, that benefit must be set off against the loss. If this is not done, the injured party will be placed in a better position financially than he was before the accident. As I said in Longden v British Coal Corporation [1998] AC 653, 665A the issue of deductibility where the claim is for loss of pension cannot be properly answered without a clear understanding of the nature of the loss claimed.

23. In some cases, as Windeyer J in Paff v Speed (1961) 105 CLR 549, 567 explained in a passage which was quoted in Parry v Cleaver [1970] AC 1, 41 by Lord Wilberforce, it will be sufficient for the defender simply to call evidence which contradicts the case the pursuer seeks to establish. He may be able to show, in answer to a claim for loss of pension, that the pursuer has in fact a pension. Or he may be able to show, in answer to a claim for medical expenses, that he received the medical treatment in question free of charge. In other cases the benefit received may be so closely related in kind to that which is lost that the same result must follow if the injured party is not to be overcompensated. The typical case is that of loss of wages. A claim that the injured party has lost wages because his employment was terminated as a result of the accident may be met by evidence that he has returned to employment elsewhere from which he has in fact been receiving wages. In each case, as Windeyer J said, the first consideration is the nature of the loss or damage that the pursuer says he has suffered. On this approach it would seem to be clear that, where the claim is for loss of pension and that it relates to a period during which that lost pension would otherwise have been payable, account should be taken of a pension which is payable to the injured party for the same period.

24. In Parry v Cleaver [1970] AC 1 the plaintiff, like the respondent in the present case, was in pensionable employment as a police officer. He was disabled from continuing in that employment as a result of the defendant's negligence. He lost the wages which he would actually received until his retirement from the police force. He also lost the opportunity, by continuing to serve and make his contributions under the pension scheme, to obtain his full retirement pension when he reached his retirement age. On the other hand he obtained employment as a clerk from which he gained wages which were admittedly to be set off against the wages which he lost. He also became entitled for the rest of his life to an ill-health pension, but this pension was lower than it would have been if he had continued in the police force until the retirement age.

25. The main question in the case was whether the ill-health pension was to brought into account in the assessment of his damages. Lord Reid said at p 13 that it was necessary to begin by considering general principles:

26. He then drew a distinction, as regards the ill-health pension, between the position up to the retiring age from the police force and the position after the retiring age. He held that the ill-heath pension had to be left out of account for the period up to the retiring age. But he noted that there was no dispute that the ill-health pension had to be brought into account in order to calculate the loss for the latter period. Lord Reid explained the reason for this difference of treatment at p 20-21:

27. I think that it is clear from this passage that Lord Reid's answers to the two question which he had identified at p 13 would have been, first, that what the plaintiff lost as a result of the accident was the diminution in the ultimate product of the insurance scheme and, secondly, that the question whether he had received something else which he would not have received if there had been no accident did not arise. As Oliver LJ said in Auty v National Coal Board [1985] 1 WLR 784, 807H, the conclusion which is to be drawn from this passage in Lord Reid's speech is that, to the extent of the ill-health pension payable after retirement age, the plaintiff had suffered no loss.

28. Lord Pearce said at p 33C-D:

Lord Wilberforce also said at p 42F-G that he saw no inconsistency in treating these two periods differently. He said that they gave rise to two quite different equations, and that the difficult legal questions which related to the earlier period did not arise in relation to the latter, where all that was needed was an arithmetical calculation of pension loss.

29. Your Lordships were not referred to any Scottish case prior to the 1982 Act in which consideration had been given to the question credit had to be given, in the assessment of a pursuer's claim for the loss of a retirement pension, for an ill-health or disability pension to which the pursuer became entitled under the same scheme as a result of the accident. But I do not think that it can be doubted that the same result would have been reached as that which was achieved by agreement in Parry v Cleaver. The observations of their Lordships on that part of the plaintiff's claim were, of course, obiter. But they would have been treated with great respect in Scotland, as the principles upon which they were based are entirely consistent with the principle of Scots law that damages are intended to be compensatory. In Wilson v National Coal Board 1981 SC (HL) 9 the speeches in Parry v Cleaver were referred to as useful guides to the position in Scotland: per the Lord President (Emslie) at pp 14-15, Lord Keith of Kinkel at p 21. The point could have been made with equal force in Scotland that in essence the claim was one for diminution of pension as both the retirement pension and the ill-health pension were products of the same scheme, that the calculation to establish the amount of the loss required like to be compared with like and that it was in the end simply a matter of arithmetic.

Section 10 of the 1982 Act

30. The question is whether the words used in section 10 preclude the approach to this issue which was approved in Parry v Cleaver [1970] AC 1 and which, there is every reason to think, would have been adopted in Scotland if the statute had not intervened to produce what has been held by the First Division to produce the opposite result.

31. The first part of section 10 contains a list of payments and benefits which are not be taken into account so as to reduce the amount of damages to the injured person. I shall call this, for short, "the prohibition". The second part contains a list of payments and benefits which are to be taken into account. I shall call this "the direction". Mr Campbell conceded that the respondent's ill-health pension is a contractual pension within the meaning of section 10(a). So it is common ground that it is caught by the prohibition in the first part of the section. But the extent of the prohibition nevertheless requires to be analysed, as also does the extent of the direction in the second part. This turns upon what is meant by the words "taken into account" in assessing the amount of damages.

32. It should be noted that these two lists have one thing in common. The items in each list are of the kind that requires a decision on grounds of policy as to whether or not they should be taken into account in the assessment. This because their common characteristic is that they may be thought to be receipts of a different kind from the loss claimed or relate to a different period. The issue to which both lists appear to be directed is the possible mitigation of a loss which has been suffered by the injured party. The words "so as to reduce that amount" indicate that the lists only arise for consideration once the amount of the loss claimed has been identified.

33. There are however two possible meanings that can be given to the phrase "that amount". One is that the exercise refers to the total amount claimed, so that both the prohibition and the direction must be applied to the total amount without regard to the nature of the various heads of the claim. The other is that regard must be had to the nature of each head of loss or damage, and that the prohibition and direction as the case may be is to be applied to each head only so far as it is relevant to the nature of the item of loss claimed.

34. The distinction between these two meanings can be demonstrated by assuming that the claim is in whole or in part a claim for solatium. Solatium is an amount awarded to the injured party for pain and suffering caused by the injury. It is an award for non-pecuniary loss. So it is assessed without regard to the amount of any sums lost or received after the accident by way of earnings, pension or other benefit. Taken literally it, the direction in section 10(i) that any remuneration or earnings from employment shall be taken into account in assessing "the amount of damages" payable to the injured person would appear to require remuneration or earnings from employment after the accident to be brought into account by way of deduction in the assessment of solatium. But to do this would require a pecuniary gain to be set off against a loss that is not pecuniary. It is hard to believe that such a surprising result was intended by Parliament. In practice solatium continues to be assessed, as it always has been, as a self-contained head of damages without taking into account any remuneration or other payments lost or received since the accident. On the other hand section 10(iv) requires account to be taken of any payments of a benevolent character made directly to the injured person by the responsible person following on the injuries. Payments of this kind may be presumed to have been made as payments to account of damages. So there can be no objection on grounds of principle to setting off these payments against any amount to be awarded as solatium when assessing the amount of damages.

35. These examples show that the correct approach is to apply the prohibition or the direction in section 10, as the case may be, only in so far as the nature of the payment or benefit that is in issue is relevant to an assessment of the head of damages claimed. The first step is to identify the nature of the loss claimed and then to calculate the amount of that loss. Only when this has been done does the question arise as to whether or not the listed receipts should be taken into account so as to reduce that amount.

36. The prohibition in section 10(a) refers to "any contractual pension or benefit". Where the head of damages which is in issue is a claim for loss of earnings, the prohibition is plainly relevant to the calculation of the amount of the injured party's pecuniary loss for the relevant period. But what is to be done where the head of damages which is in issue is a claim for the loss of a contractual pension or benefit is met by evidence of the receipt of a pension, or a benefit of the same kind, under the same contract? The answer is to be found in the nature of the claim. In the situation which I have envisaged, the injured party's loss can only be measured by comparing the pension or benefit which has been lost with that which has been received. The measure of the loss is the difference between these two amounts, comparing like with like. There is no place for the prohibition in that calculation. The loss can only be measured by taking the contractual pension or benefit into account. Once that calculation has been completed there is no need of the prohibition. It is obvious that the contractual pension or benefit cannot be taken into account again at that stage. That would be open to the objection of double-counting.

37. In my opinion the report of the Scottish Law Commission supports this interpretation of section 10. It was proceeded by a consultation paper (Memorandum No 21, Damages for Personal Injuries: Deductions and Heads of Claim, 1 December 1975). Paragraph 4 of the consultation paper set out the background to the Commission's consideration of the question what benefits received by an injured person should be taken into account in assessing his claim for damages. The following sentence identifies the mischief which the Commission was seeking to address:

38. As Lord Coulsfield said at p 417F-G of his opinion in the present case, there is not a trace in the Commission's report of any reasoning which might support a departure from Lord Reid's argument in Parry v Cleaver [1970] AC 1 that a comparison of an ill-health pension with a post-retirement pension is a comparison of like with like and therefore no deduction can properly be made in assessing post-retirement loss. Nor is there any argument which would justify a situation in which a pursuer could receive his ill-health pension, post-retirement in full and also compensation for what could only be regarded as a notional post-retirement loss. On the contrary, I would add, the report contains clear statements in the passages in paragraphs 5 and 47 to which I have already referred that the Commission's recommendations proceed upon a recognition of the general principle of Scots law of reparation that damages are intended to be compensatory. It is clear that the Commission did not intend to depart from the principle that the injured party should not be placed in a better position financially than he was before the accident.

39. There is no sign in the reported cases that section 10 of the 1982 Act has been regarded hitherto as giving rise to the difficulty which in their decision in the present case the learned judges of the First Division have identified. As S A Bennett, Setting Off on the Wrong Foot, 2000 SLT (News) 214, has pointed out, it seems rather to have been taken for granted that the provision did not fall to be applied to claims in respect of loss of pension rights. In Mitchell v Glenrothes Development Corporation, 1991 SLT 284, one of the heads of damages claimed was loss of pension rights. Lord Clyde assessed the amount to be paid under this head of claim by applying a multiplier to a multiplicand based on the current level of the pursuer's wage. At p 291B he said that one of the factors which he took into account was the possibility of another pension being forthcoming. He referred in the course of his discussion of this head of claim to the treatment of claims for loss pension rights in Parry v Cleaver [1970] AC 1 and Auty v National Coal Board [1985 ] 1 WLR 784. There is no suggestion in his opinion that the treatment of claims of this kind in England was not a reliable guide to how they should be treated in Scotland. In Davidson v Upper Clyde Shipbuilders, 1990 SLT 329, 334L, Lord Milligan agreed with counsel for the pursuer's acceptance that the pursuer could make no claim for loss of pension rights for the period after which she would have become entitled to a widow's pension in her own right after her husband's death. He said that this was consistent with the decision in Auty's case and with the reasoning in Lord Reid's speech in Parry's case.

40. In Leebody v Liddle, 2000 SCCR 495, the pursuer's claim for damages also included a claim for loss of pension rights. The amount of the difference between the pension which the pursuer would have received under his employers' pension scheme had he retired at the age of 65 and the reduced pension which he would receive from the age of 65 under his actual retirement arrangements was agreed. The defenders' argument was that against any such reduction there had to be set the pension benefits received and to be received up to that birthday as well as the pension benefits to be received after that date. The pursuer's argument was that the effect of section 10(a) of the 1982 Act was to prevent a pension obtained on early retirement being brought into account so as to reduce loss of earnings. Lord Ordinary, Lord Macfadyen, was referred to Lord Milligan's opinion in the present case but not to the decision of the First Division. The present case was still at avizandum when the case before him was being argued. The First Division did not have the advantage of seeing Lord Macfayen's opinion as it was not delivered until after their decision in the present case had been issued.

41. At p 522E-523A Lord Macfadyen said:

Cantwell

section 10

Parry v Cleaver

42. I consider that this passage correctly sets out the approach which is to be taken to claims for loss of pension. The periods before and after the normal retirement age require to be considered separately. Prior to the retirement age the claim is for loss of earnings. Pension benefits received during that period cannot be set off against the claim for loss of earnings. The effect of section 10(a) of the 1982 Act was to make it clear that the decision to that effect in the English case of Parry v Cleaver [1970] AC 1 applied also in Scotland. After the retirement date the claim is for loss of pension. In order to compare like with like, pension benefits received and to be received after that date must be brought into account. As this is the only way in which the amount of the compensation due for the loss of pension can be calculated, section 10(a) does not apply.

43. I would therefore hold that the law of Scotland requires the calculation of the respondent's claim for loss of his retirement pension to take his ill-health pension into account in the assessment of the amount which he has lost. It seems to me that this conclusion is inevitable on the facts of this case, as the two pensions are both products of the same scheme. It may be thought that the only reason why the issue has given rise to difficulty is the difference between the names which have been given to them by the Regulations. The correct view of the facts shows that the claim is simply one for the diminution in the amount of the pension to which the respondent is entitled under the Scheme. The amount by which his pension has been diminished cannot be calculated without setting the amount of the ill-health pension against the amount of the retirement pension.

Paragraph 20 of the Scheme

44. Paragraph 20 of the Criminal Injuries Compensation Scheme departs from the common law, because it states that where the victim is alive compensation will be reduced to take account of any pension accruing as a result of the injury. Where the pension is taxable, as it is in the present case, one-half of its value is to be deducted. The Board observed in its judgment in the present case that the policy followed by the Board has been to deduct half of any ill-health pension up to the date of occupational retirement and thereafter to deduct the net amount of the pension in full from the net amount of the pension otherwise payable. As I have already noted, there was a difference of view as to whether this policy was correct on a proper construction of paragraph 20. The minority view was that the deduction of one-half of the ill-health pension applied also to the post-retirement period.

45. It has to be said that paragraph 20 is less than explicit on this point. Mr Mitchell QC for the respondent did not invite your Lordships to endorse the view of the minority. For completeness however I should add that I agree with the judges of the First Division that the majority view was the correct one. The first sentence of paragraph 20 says that compensation will be "reduced" to take account of any pension accruing as a result of the injury. Although it does not say so in terms, it seems to me that this sentence must be directed to the period prior to the retirement date when the claim is for loss of earnings. It assumes that the necessary arithmetic has been done to calculate the amount of that loss. It then requires a reduction to be made from that amount, which is limited to one-half of the pension where it is taxable. But after the retirement date the claim is for loss of pension. The amount of the compensation for the pension loss cannot be calculated without bringing fully into account the whole of any pension accruing as a result of the injury. That calculation must be completed before any question can arise about reducing the compensation. In the absence of clear language to the contrary, paragraph 20 must be read as having no application to the question how a claim for loss of pension after the retirement date is to be calculated.

Conclusion

46. I would hold that the construction of section 10(a) which the First Division felt compelled to adopt was wrong and that the Lord Ordinary was right to refuse the respondent's application for judicial review. I would allow the appeal, recall the interlocutor of the First Division and restore the interlocutor of the Lord Ordinary.

LORD HOBHOUSE OF WOODBOROUGH

My Lords,

47. I too agree. The statutory provision relevant to the present case is s.10 of the Administration of Justice Act 1982, as amended. This provides among other things that "in assessing the damages payable to the injured person in respect of personal injuries there shall not be taken into account so as to reduce that amount .... any contractual pension or benefit ....". At the time he received his injury, Mr Cantwell was a serving police officer covered by the statutory Police Pensions scheme. It is agreed that this scheme is to be treated as a "contractual" pension scheme even though it was the creature of section 1 of the Police Pensions Act 1976 and the Police Pension Regulations made thereunder. The terms of the scheme are to be found in the Regulations and in particular Schedule B to the 1987 Regulations (SI. 1987 No.257) as amended. It is essentially a contributory scheme with the benefits calculated by reference to periods of service and average earnings. Following the drafting of s.1 of the Act and Part B of the 1987 Regulations, the Schedule deals with the various personal awards which may be made under the scheme. These include the "Policeman's Ordinary Pension" payable to a policeman who retires after at least 25 years pensionable service (Article B1 and Part I of the Schedule) and the "Policeman's Ill-Health Pension" payable to a policeman who retires early on the grounds of ill-health (Article B3 and Part III of the Schedule ).

48. As a result of his injury, Mr Cantwell suffered a number of losses. These included losses of earnings and loss of pension. At the time of the incident Mr Cantwell was not too far off completing his 25 years service and becoming entitled to retire on the full 'ordinary' retirement pension. Following his injury he had, in effect, to take early retirement. Because he was retiring on health grounds, he immediately qualified for (among other personal awards) an ill-health pension payable under Part III of the scheme without having to wait until he reached his normal retirement age. As his pension became payable earlier than otherwise would have been the case and because he was no longer working and therefore no longer notionally contributing to his pension out of his wages as a police officer (together with notional employer's contributions), the pension was lower than it would have been if he had continued to work in the police force till his normal retirement age. Accordingly, when he came to the age when, if in good health he would normally have retired, he was only entitled to a reduced pension. He thus suffered a loss of pension which he was entitled to recover from the wrongdoer or from the Criminal Injuries Compensation Board.

49. The argument of Mr Cantwell is that he has lost his 'ordinary' pension of about £15,200 pa and has received an 'ill-health' pension of about £13,500 instead. He says that under s.10 the £13,500 is to be disregarded and not taken into account. Accordingly he submits that he is entitled to claim compensation on the basis of having lost £15,200 pa not £1,700 pa. He was not successful before the single member or the Appeal Board. The Lord Ordinary upheld the Appeal Board but the Inner House disagreed and held that the claim should have been allowed: [2000] SC 407.

50. Both counsel adopted the formulation of Lord Reid in Parry v Cleaver [1970] AC 1 at p.13:

Lord Reid is thus posing two questions of fact and a third question of law. Mr Cantwell would answer them (on the figures we are using): £15,200; £13,500; no. The appellants would answer the first question £1,700 and the remaining questions do not arise; s. 10 does not apply because there is no sum which is being taken into account in reduction of the amount of Mr Cantwell's loss.

51. In my judgment the appellants are right. Like very many questions arising in relation to the law of the assessment of damages, it is really a question of fact and finding the answer depends not so much upon any principle of law but on the application of sound processes of reasoning. In the present case what is involved is Mr Cantwell's loss of pension following his reaching the age at which he would ordinarily have retired. There is no dispute between the parties as to the treatment of the earlier period between the time he received his injuries and the time he reached his normal retirement age. On any view the first question to be answered is what loss has Mr Cantwell suffered. Mr Cantwell has been enabled to formulate his claim only because the pension scheme uses different terms to describe the full-term pension - the 'ordinary' pension - and the advanced but reduced pension - the 'ill-health' pension. He will not get the former; he will only get the latter. But he will get a pension under the scheme. It is still the same scheme; the payer remains the same. It remains the same type of pension, that is to say, a pension paid out of contributions which are treated as having been made over the duration of his employment in the police service. The only thing that has changed during the relevant period is that it is paid at a reduced rate. In this situation, to say that the sum which Mr Cantwell would have received but for the accident and which, by reason of the accident, he can no longer get was £15,200 pa does not accord with the admitted facts. He has not lost the whole of that sum. He has only lost part of it. The correct way to describe what has happened is to say that his pension has been reduced. Similarly, if the reduction in his pension had been smaller, say, £100 pa, it would more readily be appreciated that it would be an abuse of language to say that he had lost £15,200. Yet the logic of his argument would be the same. Mr Cantwell's argument fails on the facts. (See also Lord Reid's dictum at [1970] AC pp.20-1 stressing the need to compare like with like, followed and applied by Oliver LJ in Auty v NCB [1985] 1 WLR 784 at p.807.)

52. In view of this there is no need to go into the legal fallacy which underlies much of the argument of Mr Cantwell. The law draws a distinction between the suffering of a loss and the mitigation of that loss. Mitigation is a form of the avoidance of loss either as the result of receiving some benefit which would not have been received but for the incident which gave rise to the loss or as the result of voluntarily taking advantage of an opportunity to reduce the loss. The subject matter of s.10 is the inclusion or exclusion of mitigation. The statute makes additional provision for what may and may not be taken into account by way of mitigation in qualification or supplement of the common law rules. But the original structure is still there. The question of mitigation only comes into the assessment after the loss itself has been ascertained. It is true that criteria of causation are used throughout the enquiry as are criteria of remoteness. But mitigation and avoidance of loss remain concepts of the mitigation and avoidance of losses which have already been identified. It is this first vital step which Mr Cantwell's argument misses out.

53. For these reasons and those given by my noble and learned friend Lord Hope of Craighead, I agree that the appeal should be allowed as he has proposed.

LORD SCOTT OF FOSCOTE

My Lords,

54. I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill, Lord Hope of Craighead and Lord Hobhouse of Woodborough. For the reasons they have given I, too, would allow the appeal and make the order proposed.