UK Social Security and Child Support Commissioners' Decisions

Secretary of State v. Hagan [2001] UKSSCSC CIS_4478_1999 (30 July 2001)

R(I) 2/02

(Secretary of State v. Hagan)


CA (Schiemann, Mance and Keene LJJ) CIS/4478/1999

30.7.01

Reduced earnings allowance - more than one industrial accident each causing a change in regular occupation - whether there can be a reduced earnings allowance claim for each accident

The claimant had two industrial accidents, in 1982 and 1984. On different dates in 1998 he made two claims for reduced earnings allowance (REA). The first claim, made in respect of the first accident, was disallowed, but he was awarded REA on the second claim, made in respect of the second accident, from a date three months before that claim. The claimant's appeal against the disallowance was dismissed by a tribunal and he appealed to the Commissioner. The Commissioner held inter alia that there could be only one award of REA and that loss of earnings from all accidents should be taken into account in that one award made on one claim, subject to the maximum of 40% of the maximum rate of a disablement pension as provided in paragraph 11(10) of Schedule 7 to the Social Security Contributions and Benefits Act 1992. The Commissioner therefore decided that the second claim had been unnecessary and that the claimant was entitled to REA from a date three months before the first claim. The Secretary of State appealed.

Held, allowing the appeal, that:

there can be multiple claims for and awards of REA where there are successive industrial injuries each of which makes the claimant incapable of following his current regular occupation;

on each claim the maximum amount of REA payable is 40% of the maximum disablement pension;

the maximum total amount of disablement pension and reduced earnings allowance payable in respect of all the accidents is the 140% referred to in the last part of paragraph 11(10);

the claimant was not entitled to REA for the period more than three months before the second claim.

DECISION OF THE COURT OF APPEAL

Mr. J. Maurici (instructed by the Solicitor to the Department of Social Security) appeared for the Appellant.

The respondent did not attend and was not represented.

Judgment

LORD JUSTICE SCHIEMANN:

1. This appeal raises a point of considerable general importance in relation to reduced earnings allowance. We have in front of us Mr. Maurici for the Secretary of State, who is the appellant. No one appears on the other side. That is totally understandable because the actual amount of benefit which the Secretary of State maintains has been overpaid is small, and the Secretary of State has indicated that he has no intention of seeking to recover it or seeking to obtain any costs in these proceedings. He brings them purely in the public interest in order to maintain what he sees as the purity of the social security scheme.
2. Reduced earnings allowance ("REA") is a social security benefit payable where an employed earner cannot continue in his regular occupation because of an industrial accident and suffers a reduction in earnings as a result. Most claimants for reduced earnings allowance suffer only one industrial accident in their working lives and thus have only one change of occupation consequent on an industrial accident. However, a minority of claimants first suffer an industrial injury in Job A and consequently move to Job B with an accompanying reduction in earnings, and then suffer a further industrial accident in Job B, resulting in a further change of regular occupation to Job C and a further reduction in earnings.
3. We are told by Mr. Maurici that there are over a thousand people in that type of situation. This case, we are told in the excellent skeleton argument prepared on behalf of the Secretary of State by Mrs. Forsdick who unfortunately is unable to argue the case today, raises an important point about the way in which REA is to be claimed by claimants who have over time suffered more than one industrial accident each of which causes a change in regular occupation.
4. The position of the appellant on this appeal is that (1) a claimant for REA is entitled to make a separate claim for each change of regular occupation caused by each industrial accident if that change of occupation results in a drop in earnings; and (2) there is no rule of law that requires all accidents, whenever they occur, to be considered together on one claim. The social security Commissioner held that each claimant could only make one claim which had to cover all accidents and all changes of occupation. The point is of considerable practical importance for a number of claimants.
5. Prior to the social security Commissioner's decision it was accepted practice that claimants who had suffered successive industrial accidents, each of which caused a change in regular occupation and a consequent reduction in earnings, could make a separate claim in relation to each accident. Thus, a person who had suffered three industrial accidents, each of which had individually meant that he could not continue in his regular occupation and suffered a pay cut as a result, could make three separates claims for REA and thus be entitled to up to three times the statutory limits of REA on a single claim.
6. Thus in this case the Secretary of State for Social Security is in the relatively unusual position of arguing for a more generous interpretation of the law than that adopted by the social security Commissioner; although on the facts of this case the interpretation does not assist the claimant.
7. I take, not merely the foregoing, but also the bulk of what follows from the skeleton argument to which I have referred. By virtue of section 103(1) of the Social Security Contributions and Benefits Act 1992:

"An employed earner shall be entitled to a disablement pension if he suffers as the result of an industrial accident from loss of physical or mental faculty such that the assessed extent of the resulting disablement amounts to not less than 14 per cent."

8. The amount of disablement pension payable is calculated by reference to the percentage disability assessed (see Schedule 4, Part V(1)). So if a person is assessed as 50 per cent disabled he will receive 50 per cent of the maximum disability pension.
9. The percentage disability is assessed by reference to Schedule 6 to the Contributions and Benefits Act 1992 and the Social Security (General Benefit) Regulations 1982, regulation 11 and Schedule 2. For example, the percentage disability prescribed for the loss of an eye is 40 per cent.
10. Section 103(2) provides for the aggregation of assessments of disability from earlier accidents:

"In the determination of the extent of an employed earner's disablement for the purposes of this section there may be added to the percentage of the disablement resulting from the relevant accident the assessed percentage of any present disablement of his-

(a) which resulted from any other accident after 4 July 1948 arising out of and in the course of his employment ... "

Section 106 provides for other benefits consequential upon industrial injuries including REA. The provisions in relation to REA are contained in Schedule 7(11) of the Social Security Contributions and Benefits Act 1992.

Paragraph 11(1) of this provides:

"Subject to the provisions of this paragraph, an employed earner shall be entitled to reduced earnings allowance if-

(a) he is entitled to a disablement pension or would be so entitled if that pension were payable where disablement is assessed at not less than 1 per cent; and

(b) as a result of the relevant loss of faculty he is either-

(i) incapable, and likely to remain permanently incapable of following his regular occupation; and

(ii) incapable of following employment of an equivalent standard which is suitable in his case ...

but a person shall not be entitled to reduced earnings allowance to the extent that the relevant loss of faculty results from an accident happening on or after 1st October 1990."

11. It is to be noted that there is no aggregation provision equivalent to section 103(2) in respect of disablement pension.
12. Paragraph 11(8) provides that REA shall be awarded for such period as may be determined at the time of the award and thereafter on any renewal claim for such further period as may be determined. These are hereafter referred to as successive claims for REA.
13. The rate at which REA is to be paid is determined pursuant paragraph 11(10) of Schedule 7.
14. A number of challenges faced the draughtsman. The first of these was to determine the basis upon which reduced earnings were to be calculated. The answer arrived at was to compare, on a prescribed basis, what the claimant would have earned but for the injury, with what in fact he was earning.
15. The second arose out of the relationship between the disablement pension and REA. It was desired to put a cap on the amount of REA paid. This cap was to be determined by reference to two factors. The first was that the weekly amount of REA was not to exceed 40 per cent of the amount of the pension; the second was that the aggregate of the REA and the disablement pension was not to exceed 140 per cent of the pension. The limpid style developed after years of drafting social security legislation payments does not favour short sentences. Instead, all these considerations are reflected in the following long sentence which appears in paragraphs 11(10):

"Reduced earnings allowance shall be payable at a rate determined by reference to the beneficiary's probable standard of remuneration during the period for which it is granted in any employed earner's employments which are suitable in his case and which he is likely to be capable of following as compared with that in the relevant occupation, but in no case at a rate higher than 40 per cent of that maximum rate of a disablement pension or at a rate such that the aggregate of disablement pension ... and reduced earnings allowance awarded to the beneficiary exceeds 140 per cent of the maximum rate of the disablement pension."

16. In short, the assessment of REA is carried out by comparing the likely future earnings in the occupation which the claimant has had to move to by reason of the accident with the likely earnings from his occupation prior to the accident. The maximum amount of benefit payable under REA in each case must not exceed 40 per cent of the maximum possible disablement pension, and in any case the total REA and disablement pension payment must not exceed 140 per cent of the maximum possible disablement pension. So if the maximum rate of disablement pension is £100 per week, and if the reduction of earnings caused by the relevant accident is £80 per week, the amount of REA payable in respect of that accident should be limited to £40 per week. If, however, the reduction of earnings caused by the relevant accident is £30 per week, then that sum would be payable as REA.
17. Paragraph 13 of Schedule 7 relates to a further benefit known as retirement allowance. It is relevant for reasons which follow, and provides:

"(1) Subject to the provisions of this Part of this Schedule, a person who-

(a) has attained pensionable age; and

(b) gives up regular employment on or after 10 April 1989; and

(c) was entitled to reduced earnings allowance (by virtue either of one award or of a number of awards) on the day immediately before he gave up such employment,

shall cease to be entitled to reduced earnings allowance as from the day on which he gives up regular employment."

18. From the above, it can be seen that disablement pension is concerned with the extent of disability caused by the relevant accident (see section 103) whereas REA is concerned with the reduction in earnings caused by the relevant accident (see para. 11(1) of Schedule 7).
19. Paragraph 11(10) serves to limit the amount of REA payable.
20. It is the Secretary of State's case that the 40 per cent limit applies to each claim arising from each separate accident and that a person may have more than one claim for REA (as shown by the words underlined in paragraph 13(1) of Schedule 7 above) each of which entitles him to up to that 40 per cent.
21. The facts of the case one can take fairly shortly. The applicant had an accident ("the first accident") on 18 August 1982, and he returned to work with the same employer. But his job changed somewhat from being what is described as a "general-turn roofer" to being a felt roofer. He was awarded disablement benefit in respect of that of 20 per cent for life in due course.
22. On 15 October 1984 the applicant had a second accident and he could no longer work as roofer. He then made on 7 April 1998 (many years later) his first claim for REA in respect of the first accident. That was refused because a felt roofer was held to be effectively the same occupation as a general-turn roofer. On 14 April 1998 (a week later) the applicant put in a different claim for REA in respect of the second accident. The benefit was awarded and backdated three months as permitted by the statute.
23. There was then an appeal to the social security appeal tribunal in relation to the refusal of REA for the first accident. They held that he was not entitled to it. There was then a further appeal to the social security Commissioner.
24. The decision of the social security Commissioner is in two parts. The first relates to whether the appeal tribunal asked itself the right question in relation to the regular occupation. That is not relevant to this appeal, as the Secretary of State accepts and endorses the social security Commissioner's conclusion on this aspect, which is contained in paragraphs 1 to 8 of his decision, which I do not need to read.
25. The second part of the decision relates to the entitlement to benefit for the week 7 to 13 January 1998. This was the issue raised by the social security Commissioner in a direction which led him to award benefit for that week.
26. The issue is covered in paragraphs 9 and 10 of his decision. I quote from the point when the Commissioner refers to the lady who was presenting the Secretary of State's case to him. He said this:

"... I accept Ms. Main Thompson's alternative submission that, where a person has a cumulative loss of earnings due to a number of industrial accidents each of which has made him or her incapable of following a different "regular occupation", he or she is entitled only to one award of reduced earnings allowance in respect of all the accidents and that award must be subject to the statutory maximum. Otherwise, a person disabled in three separate accidents might be entitled to three times the amount of benefit payable to a person similarly disabled and suffering the same consequent loss of earnings as a result of a single accident. That cannot have been intended. It is true that there is no specific provision for aggregation of disablement for reduced earnings allowance purposes as there is in section 103 of the 1992 Act for disablement pension purposes but in my view that is unnecessary because reduced earnings allowance is linked to disablement pension by paragraph 11(1)(a) of Schedule 7 to the 1992 Act. Aggregation means that there should be only one award of disablement pension however many accidents there may have been and in paragraph 11(1)(b) the singular "relevant loss of faculty", "relevant occupation" and "employment" must be taken to include the plural (section 6(c) of the Interpretation Act 1978) so that an award of reduced earnings allowance reflects the cumulative loss of earnings from all the disabilities taken into account in the award of disablement pension.

10. The consequence of taking this approach is that it is unnecessary to make separate claims for reduced earnings allowance in respect of each accident. Loss of earnings in respect of all accidents should be taken into account in one award made on one claim. It follows that, in the present case, the loss of earnings due to the second accident should have been taken into account in the first claim and the second claim was not necessary at all. As the second claim has in fact been made and adjudicated upon, the period remaining in issue on the first claim is just the one week from 7 January 1998 to 13 January 1998. Benefit cannot be awarded in respect of any earlier period because the claim was late."

27. He then awarded the maximum amount of reduced earnings allowance for that week. His decision concludes as follows:

"For the reason given in paragraph 7 above, I set aside the decision of the Bolton social security appeal tribunal dated 29 March 1999. For the reason given in paragraph 10, I substitute my own decision which is that the claimant is entitled to reduced earnings allowance at the maximum rate from 7 January 1998 to 13 January 1998. To that limited extent, the claimant's appeal succeeds."

28. The Secretary of State's position is that he regrets that the Commissioner was misled by the Secretary of State's own representative as to what the Secretary of State, and indeed I, regard as the correct interpretation of paragraph 11(1) and 11(10). His position is that: (1) there can be multiple claims for and awards of REA in circumstances where there are successive industrial injuries each of which causes a change from the previous regular occupation; (2) on each claim the maximum amount of REA payable is 40 per cent of the maximum disablement pension; but (3) this 40 per cent limit applies only to each claim separately and if there are multiple claims then the maximum amount payable is not 40 per cent but the 140 per cent referred to in the last part of paragraph 11(10).
29. The Secretary of State put before the court the following example. In 1986 a mining foreman suffers an injury in the mine and loses his hearing such that he can no longer be a foreman and has to be "demoted" to a miner. The assessment of disability by reason of the loss of hearing is 20 per cent and the reduction in earnings is significantly in excess of 40 per cent of the disablement pension. On a claim for REA and disablement pension immediately after this accident he would have been awarded 20 per cent of the maximum disablement pension as disablement pension, and 40 per cent of the maximum disablement pension as REA. Two years later he lost the use of an arm by reason of an explosion in the mine, as a result of which he could no longer work down the mine and had to be further "demoted" to a "winchman". His assessment of disability in relation to this accident (loss of use of arm) is 30 per cent, leading to an aggregated disablement pension award under section 103(2) of 50 per cent. His loss of earnings is again substantially in excess of 40 per cent of the maximum disablement pension and so on the basis of his second accident and the second change of regular occupation, he would again be entitled to 40 per cent of REA. The cumulative effect is 80 per cent of the maximum disablement pension by way of REA and 50 per cent by way of disability pension. This is less than the maximum in the final part of paragraph 11(10) and therefore total benefit amounting to 130 per cent of the maximum amount of disablement pension is payable by reason of the two accidents under the separate benefits.
30. On the analysis of the social security Commissioner on the same facts, the miner would be entitled to 50 per cent disablement pension because of the aggregated effect of the injuries pursuant to section 103(2) but would only be entitled to make one REA claim giving rise to a maximum entitlement of 40 per cent of REA and thus an overall total of 90 per cent of the maximum disability pension. That example illustrates why it is that I said at the beginning of this judgment that the Secretary of State is in the relatively unusual position of arguing for a more generous interpretation of the law.
31. The Secretary of State submits that the approach of the social security Commissioner is predicated upon there being some statutory restriction on the number of claims for REA which can be made, because if there was no such restriction the Commissioner accepted that "if a claimant were entitled to separate awards [of REA] in respect of each accident, the statutory maximum would have to be applied to each award separately."
32. The Commissioner finds the statutory restriction in two ways. First, he notes the aggregation requirements under section 103(2) in relation to disablement pension and applies these requirements to REA; and second, he applies section 6(c) of the Interpretation Act to read paragraph 11(1)(a) of Schedule 7 in the plural.
33. The Secretary of State submits that in both these respects the Commissioner has erred in law.
34. The submission on aggregation was as follows. Section 103(2) allows aggregation of the percentage disablement arising from different accidents for the purposes of disablement pension. Subject to the 14 per cent threshold (which is not relevant for these purposes) percentage disablement has nothing to do with entitlement to, or assessment of quantum, of REA which is concerned not with the degree of disability but with the financial implications of being unable to continue with regular employment.
35. The power to aggregate percentage disablement in considering claims for disablement pension does not cover, does not refer to and does not implicitly require the aggregation in just one claim of reductions in pay caused by successive changes in regular employment caused by successive accidents for the purposes of establishing eligibility to REA.
36. In short, submits the Secretary of State, the aggregation under section 103(2) is a wholly different type of aggregation from that which the Commissioner held applied to REA claims. There is no statutory authority and no statutory requirement to the latter aggregation.
37. Nor, he submits, is there any merit in the Commissioner justifying the aggregation by reference to the link between the pension and the REA in paragraph 11(1)(a) of Schedule 7. There is such a link but: (1) eligibility to REA is not predicated upon a successful claim for pension. That is because a claimant can satisfy paragraph 11(1)(a) with only a 1 per cent disability which is not sufficient to establish pension entitlement; and (2) the link is not relevant to the question in issue. The fact of the link between the two benefits does not mean that a wholly different form of aggregation in a different benefit is either authorised or required by section 103(2).
38. Further, the fact that there is an express power to aggregate percentage disablement for different injuries in section 103(2) suggests that in the absence of such power, such aggregation would not be permitted. Given that there is no power to aggregate under REA, he submits that no aggregation for REA should be permitted.
39. He submits that he is not entitled to refuse to determine a claim (in this case the second claim) on the basis that the matters set out therein could have been raised in an earlier claim unless there is some statutory restriction on determining the second claim. And he submits that it is clear there is no such statutory restriction.
40. So far as the argument on the Interpretation Act is concerned he makes the broad point that, even if one carries out the exercise postulated by the Commissioner it produces rather puzzling results in a number of respects. First, paragraph 13(1) of Schedule 7 clearly envisages there being situations in which there is more than one concurrent claim for REA at the date of retirement. If that were not the case the words in brackets in that paragraph ("by virtue of either one award or a number of awards") would be meaningless in their context.
41. Second, he points out that the second part of paragraph 11(10) would be unnecessary and make no sense if only one claim for REA was permitted. That paragraph is structured so as to limit the REA award on a single claim to 40 per cent of the maximum pension and then separately to set out an upper limit on all payments of pension and REA together of 140 per cent. The maximum payment of pension is based on assessment of disability of 100 per cent. No matter how serious the disability and how multiple the injuries a total award of only 100 per cent of the maximum pension is permitted. Thus, disability pension can never exceed 100 per cent.
42. He points out that if the Commissioner were correct in his finding that only one award of REA is permitted (and that that is subject to the statutory maximum of 40 per cent) then there would be no need for the additional limitation in the final part of paragraph 11(1) because there would, in any event, be no means of exceeding 140 per cent with just one claim for REA.
43. Thus he submits that the final part of that subparagraph clearly envisages there being multiple claims for REA but with a total of pension and REA being subject to the overall limit therein out.
44. Third, he submits that paragraph 11(1) and 11(10) read together show that the legislation is directed to the effect of the individual accident and its impact on the individual's regular occupation immediately prior to that accident. When it is read in the singular it makes perfect sense - when it is read in the plural, as the Commissioner suggests, it does not. He poses the questions: what is the regular occupation to be looked at? What is the new occupation which is to be look at? How is one to establish what the employments of an equivalent standard are? And he submits that to read these sub-paragraphs in the plural is fraught with difficulty, and suggests that they should be read in the singular, with the consequence that each claim can be directed to one accident and the consequences thereof.
45. He draws attention to the concern of the Commissioner that such an approach would be surprising because it would mean that a person disabled in three separate accidents might be entitled to three times the amount of benefit payable to a person similarly disabled and suffering the same consequent loss of earnings as a result of a single accident.
46. However, he makes this point. If his submissions that REA is concerned with each individual change of regular occupation occasioned by an industrial injury are correct then there is nothing illogical about a person receiving the full benefit for each of these accidents (subject to the cap) if he is unfortunate enough to suffer successive accidents.
47. The logic of the Commissioner is effectively an argument against the upper limit of 40 per cent on each individual claim if (on the facts) an individual suffers a very serious reduction in earnings as a result of a multiple injury accident, it is not an argument in favour of his imposition of a limit of one REA claim per claimant, nor is it an argument for saying that that 40 per cent limit should not apply to each separate claim.
48. The Secretary of State submits that there is a strong policy logic for compensating claimants for each accident. Each accident, he points out, will have led to a change in regular occupation, and it is this change for which compensation is provided. A claimant who suffers three successive industrial accidents will have to downgrade his employment three times with consequential impacts on his finances each time. It is this disruption and dislocation which is the subject of REA. Those are the broad points made on behalf of the Secretary of State.
49. For my part although I have read the submissions which were drafted by Counsel on behalf of the respondent with care, I have not found in them anything which seriously grapples, or attempts to grapple, with the points set out in the skeleton argument of the Secretary of State which I have read.
50. In those circumstances I would propose that we set aside the decision of the Commissioner in part. We can affirm paragraphs 1 to 8 of his decision and set aside paragraphs 9, 10 and 12 as it stands and declare that the claimant is not entitled to reduced earnings allowance between 7 and 13 January 1998. I record once more that the Secretary of State has indicated that he does not seek to recover that.

LORD JUSTICE MANCE:

51. I agree.

LORD JUSTICE KEENE:

52. I also agree.

Order: Appeal allowed; no order for costs.