Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/2897/2011

ADMINISTRATIVE APPEALS CHAMBER

 

1. This is an appeal by the Claimant against a decision of a First-tier Tribunal sitting at Fox Court on 2 August 2011. For the reasons set out below I dismiss the appeal.

 

2. The Claimant is a woman now aged 48. She was assaulted on 27 August 1992 while working as a traffic warden for the Metropolitan Police. As a result of psychological injury inflicted she was medically retired in 1994.

 

3. As a result of her injury and retirement she became entitled to two separate benefits under the Metropolitan Civil Staffs Superannuation Scheme, a pension scheme in the same terms as, and from 31 October 2002 merged with, the Principal Civil Service Pension Scheme (PCSPS). The question in this appeal is whether the First-tier Tribunal went wrong in law in holding that the larger of those payments did not fall within the statutory disregard, in computing her income for housing and council tax benefit purposes, of payments “received by virtue of any agreement or court order to make payments to the claimant in consequence of any personal injury to the claimant.”

 

4. The larger of those payments was an “injury benefit” based on the Claimant being assessed, from 16 September 1997, as having a greater than 75% impairment of earning capacity. The benefit was initially a lump sum payment only, but following appeal by the Claimant she was awarded an annual allowance. As at 4 March 2010 this benefit was paid at an annual rate of £15,249. From 1 October 2002 the injury benefit provisions were hived off to the Civil Service Injury Benefits Scheme, but in respect of injury benefits in payment before that date (including that payable to the Claimant) the relevant provisions are preserved in Appendix 16 to the PCSPS. The relevant terms of Appendix 16 are that:

 

(a) it is a qualifying condition that the employee is injured in the course of official duty, or fulfils certain analogous conditions; [Paragraph 11.3]

 

(b) the employee receives an annual allowance such as to keep his income above a ‘guaranteed minimum’, expressed as a proportion (85% in the Claimant’s case) of the employee’s ‘pensionable earnings’ when his service ended. [Paragraphs 11.6 and 11.7].

 

(c) in determining the person’s income for the above purpose there are taken into account occupational pensions payable out of public funds and certain social security benefits. [11.7 and 11.8]

 

(d) The award may be reviewed in a number of circumstances, including when another pension becomes payable or the employee’s benefits change [11.10].

 

(e) The benefit may be withheld or reduced to take account of damages or criminal Injuries Compensation received by the employee. [11.19]

 

5. According to the 1993 ‘Guide to Injury Benefits’ in evidence before the Tribunal, the injury benefit is

 

“not intended to compensate you for pain and suffering or for loss of a particular faculty…. You will be eligible for injury benefit only if your earning capacity is impaired.”

 

6. Section 8.1 of the PCSPS expressly provides that injury benefits are “paid at the discretion of the Minister, and nothing in the scheme will extend or be construed to extend to give any person an absolute right to them.”

 

7. The smaller payment was an ill-health early retirement pension, payable under Section 3.4 of the Scheme, which as at 4 March 2010 was payable at an annual rate of £796. By contrast with the injury benefit the ill-health pension:

 

(a) is payable simply as a result of ill-health necessitating early retirement; the ill-health does not have to be caused by injury or disease incurred in the course of or directly attributable to official duty;

 

(b) is calculated as a pension by reference to a person’s existing qualifying service, enhanced to reflect early retirement;

 

(c) is not subject to deductions in respect of damages or other pensions or benefits

 

(d) is payable as of right.

 

8. The Claimant was in receipt of housing benefit and council tax benefit from London Borough of Lewisham (“the Council”) from 2002. In her initial and subsequent claim and review forms she did not disclose receipt of the payments from the PSCPS.

 

9. In March 2010 the Council discovered the possibility that the Claimant had undisclosed income and suspended payment of her housing and council tax benefit. At the time benefit had been paid up to and including 21 February 2010.

 

10. On 24 April 2010 the Council superseded and removed the Claimant’s entitlement to housing benefit and council tax benefit with effect from 4 April 2005, on the ground that the awards had been made in ignorance of the material fact that the Claimant was in receipt of the payments from the PCSPS, which were to be included in her income for the purpose of determining her entitlement to those benefits. It was further decided that the resulting overpayments were recoverable from the Claimant. The total overpayment of housing benefit was £23,571.51 in respect of the period 4 April 2005 to 21 February 2010, and the excess council tax benefit totalled £4,185.91, in respect of the same period.

 

11. The Claimant’s appeal to the First-tier Tribunal was dismissed. The Tribunal decided that it was bound by the decision of the Court of Appeal in Malekout v Secretary of State for Work and Pensions [2010]  EWCA Civ 162 to hold that both the payments from the PCSPS had rightly been taken into account in determining the Claimant’s income for the purpose of determining entitlement to housing and council tax benefit.

 

12. I held an oral hearing of the Claimant’s application for permission to appeal to the Upper Tribunal, at which the Claimant appeared in person. I gave permission to appeal, but only on one ground. I refused permission to appeal in respect of the Claimant’s other grounds of appeal, and explained briefly why.

 

13. The ground on which I gave permission to appeal was that it might be arguable that the injury benefit payment was not directly covered by the reasoning in Malekout, and did fall to be disregarded in computing the Claimant’s income for this purpose.

 

14. I held an oral hearing of the appeal itself, at which the Claimant had the considerable advantage of being represented by Mr Giles Robertson, of the Free Representation Unit. The Council was again represented by Mr David Gibson, a benefit officer employed by the Council.

 

15. The ground on which I gave permission turns on the construction and effect of the provisions in reg. 40(2) of and para. 14(1) of Schedule 5 to the Housing Benefit Regulations 2006 (and the equivalent provision in the Council Tax Benefit Regulations 2006) that in calculating a claimant’s income there shall be disregarded  

 

“any of the following payments –

 

(a) a charitable payment

 

(b) a voluntary payment

 

(c) a payment (not falling within (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.”

 

16. It is of course para. 14(1)(e) which is particularly in point in the present case. The contention on behalf of the Claimant is that the injury payment is a payment received “by virtue of [an] agreement to make payments to the claimant in consequence of any personal injury to the claimant.” The agreement relied upon is the Claimant’s contract of employment, which will in effect have incorporated the provisions of the predecessor of the PSCPS.

 

17. The provision in point in Malekout was the identical disregard in para. 15(5A) of the Income Support (General) Regulations 1987. The claimant in that case was a dental surgeon who had been employed by the National Health Service, but was forced to take early retirement in his mid 30s. His problems appear to have started when he suffered a soft tissue neck injury which he sustained when he turned his neck briskly at breakfast. However, after resuming work he began to suffer different, more serious and extensive symptoms, which led to his early retirement (see para. 4 of the judgment of Wilkie J. at [2004] EWHC 2879 (Admin). The claimant established his entitlement to an injury benefit under the National Health Service Pension Scheme by means of a consent order in judicial review proceedings, in which it was accepted that the claimant had suffered an injury attributable to his employment, namely thoracic outlet syndrome. It then took more judicial review proceedings (i.e. those before Wilkie J.) to enable some of the injury benefit to be quantified. The claimant was also in receipt of an ill-health early retirement pension under the NHS Pension Scheme. It appears that that Scheme was in similar terms to the PCSPS.

 

18. The Deputy Social Security Commissioner whose decision (CIS/1215/2008) was under appeal in Malekout appears to have proceeded on the footing that the payments in issue before her were the injury benefit payments. She held that those payments did not fall within the income disregard in that (para. 10) “this was a contractual entitlement not dependent upon establishing any negligence or other liability against his employer” and that the payments were therefore “not a compensation payment made in consequence of personal injury” (para. 1).

 

19. In para. 4 of Malekout Sir David Keene, who gave the only reasoned judgment, referred to the history leading to the award of the injury benefit payments, and then continued:

 

“But the payments in issue in the present proceedings are different. They are described in the advice payments to the appellant as “pension”, and it seems that they are indeed an early occupational retirement pension pursuant to the National Health Service Pension Scheme Regulations 1995. The Social Security Commissioner appears to have taken the view that it would make no difference to the outcome of the present proceedings whichever of these two bases was the true one. Certainly that is the Secretary of State’s position on this appeal.”

 

20. The Court of Appeal therefore dealt with the matter on the footing that the payments in issue in the appeal were the payments of ill-health early retirement pension. It is something of a mystery why the position in relation to the injury payments did not also fall to be considered directly by the Court of Appeal. Possibly it did not matter in that the early retirement pension payments may on their own have been sufficient to bring the claimant’s income above the relevant level. Another possibility is that the Secretary of State’s initial decision in respect of income support took into account only the early retirement pension as income because it was then considered that the injury payment did fall to be disregarded. Mr Robertson suggested that the reason may have been that it was considered that the consent order in the judicial review proceedings was an agreement by virtue of which the payments were made, and so the disregard applied for that reason.

 

21. The Court of Appeal dismissed the Claimant’s appeal, but its reasoning was different from that of the Deputy Commissioner. The essence of the Court of Appeal’s reasoning is set out in paras. 7 to 10 of Sir David Keene’s judgment. I do not propose at this point to set those out in full. Essentially, he concluded that the “agreement” referred to in sub-para (e) “does not … indicate an agreement predating the personal injury, but an agreement which is reached instead of a court order after the injury has occurred. The contract of employment does not seem to be the sort of agreement indicated by that phrase” (para. 9). “…… the agreement itself which gives rise to the payments must be one which is made “in consequence of” personal injury and postdate it” (para. 10). The Court of Appeal therefore held that the claimant’s contract of employment, incorporating the Rules of the Pension Scheme, did not constitute an agreement falling within the disregard, because it predated the personal injury and was not entered into in consequence of it.

 

22. In support of this appeal Mr Robertson, in his thorough and able argument, submits that the reasoning of the Court of Appeal does not and should not apply to the injury benefits in the present case, for the following reasons:

 

(1) Sir David Keene said in para. 9 that sub-para (e) “is there in order to deal with the situation where a similar payment [to those in (c) and (d)] is made, but not via a trust or annuity”. Dr Malekout’s pension was dissimilar – it was a non-compensatory payment of a pension. The injury benefit is, however, a similar payment. It compensates explicitly for “loss of earning capacity”, a head of damage in tortious personal injury claims.

 

(2) Sir David Keene went on in para. 9 to say that he could not see “any rational basis for why an earlier retirement pension, for reasons of personal injury, should be, in the absence of express provision, disregarded. After all, the earlier retirement pension is, subject to some adjustments, the normal retirement pension ….. but one which is paid earlier than normal.” That reasoning would clearly apply to the smaller payments in this case. But the injury benefit is not a pension paid earlier than normal. It is, rather, a compensatory payment paid in respect of a tortious head of damage, and the same justifications for disregarding it apply as to any other compensatory payment.

 

(3) Applying the Malekout construction to injury benefits produces absurdity, in that there would be a difference (in terms of whether the income is disregarded) between the situation where (i) the claimant’s assailant has assets or is insured, and where the claimant therefore receives periodical payments by way of tortious damages, which will extinguish or reduce the entitlement to injury benefit under the PSCPS and (ii) the claimant’s assailant has no assets and is uninsured, and where the claimant therefore receives an unreduced payment of injury benefit under the Scheme.

 

(4) If, instead of appealing (as she did) against her injury benefit award, the Claimant in the present case had begun judicial review proceedings in respect of it, she would have received her benefits either pursuant to an order of the Administrative Court, or by way of a compromise agreement. In either case the order or agreement would have postdated the injury, in which case under the reasoning in Malekout the payments would have been disregarded. It would be absurd if that would have made a difference to the result.

 

23. However, I do not agree that the reasoning of the Court of Appeal can be distinguished and held not applicable to the facts of the present case. The essence of the Court of Appeal’s reasoning was encapsulated in the final paragraph [10] of Sir David Keene’s judgment:

 

“the agreement itself which gives rise to the payments must be one which is made “in consequence of” personal injury and postdate it. In other words, it is not just the payments but also the agreement or court order which is identified and governed by the phrase “in consequence of any personal injury”. The court order is clearly one made after the personal injury. The same is true of the word “agreement” which precedes the words “court order”.”

 

24. It is true that one aspect of the Court of Appeal’s reasoning does not apply to the injury payments. That is the statement in para. 9 that there is no rational basis for distinguishing between an early retirement pension and a normal retirement pension. But the Court relied also, and determinatively, on what it saw as the consequence which flowed from the context in which the word “agreement” appeared. The conclusion which it drew from that context is one which applies equally to the injury payments. It was in effect accepting the submissions made for the Secretary of State, which had been summarised in para. 7 of Sir David Keene’s judgment, he having earlier (in para. 4) expressly noted that it was the Secretary of State’s position that it would have made no difference if was the injury benefit, and not the early retirement pension, which was in issue in the appeal.

 

25. I think that the submissions which I have summarised in para. 22 (1) to (3) above are really arguments which could be put forward (and which are of course not permissible before me) for saying that the outcome in Malekout could and should have been reached by different reasoning, but they are not arguments which enable me to distinguish Malekout.

 

26. Mr Robertson next submits that Malekout was decided per incuriam, in that no reference was made to the equivalent, in the Income Support Regulations 1987, of reg. 41(5) of the Housing Benefit Regulations 2006, which provides:

 

“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 …… shall be treated as income.”

 

27. Mr Robertson submits that the layout of the wording of reg. 41(5) indicates that it is only the payments which need be made “in consequence of any personal injury”, and that the agreement or court order need not be in consequence of the injury and therefore need not postdate it. I note that the predecessors of both reg. 41(5) and para. 14 of Schedule 5 were introduced by amendments made to the Housing Benefit (General) Regulations 1987 by the Social Security Amendment (Personal Injury Payments) Regulations 2002. (Those regulations also made identical amendments to the income support legislation). There is therefore a close link between reg. 41(5) and para. 14 of Schedule 5. However, I do not agree that reg. 41(5) provides a clear indication as to the correct construction of  para. 14 of Schedule 5 such as to enable me to hold that the reasoning of the Court of Appeal in Malekout was reached per incuriam. The most that one can say is in my view that the wording of reg. 41(5), viewed on its own, points much less firmly to the agreement needing to be in consequence of and after the personal injury than the Court of Appeal considered that the wording of para. 14(1)(e) does. But the wording of reg. 41(5) is not inconsistent with the Court of Appeal’s reasoning. It would be consistent with the wording of reg. 41(5) to hold that, having regard also to para. 14(1)(e), the agreement must postdate the injury. I am not therefore able to hold that the test for holding a decision to have been reached per incuriam is satisfied. The test to which Mr Robertson referred me was that stated by Lord Evershed MR in Morelle v Wakeling [1955] 2 QB 379:

 

“As a general rule the only cases in which decisions should be held to have been given per incuriam are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned: so that in such cases some part of the decision or some step in the reasoning on which it is based is found, on that account, to be demonstrably wrong.”

 

28. The Court of Appeal in Malekout does not appear to have been invited to consider what the reason for disregarding personal injury payments was. One would have thought that that could be highly material in deciding on the construction of para. 14(1)(e). Because I am bound by Malekout, it is not profitable for me to consider it either, and nor were any submissions really made to me about it.

 

29. As foreshadowed in his Skeleton Argument, Mr Robertson sought permission at the hearing before me to raise a further ground of appeal, namely that there had been a breach of natural justice by the First-tier Tribunal in the manner in which it raised and gave the Claimant the opportunity to deal with Malekout. It is said that this breach of natural justice prevented the Claimant from being able to deploy evidence that showed that, even if Malekout applies, there was an agreement subsequent to the personal injury such as to bring the injury payments within the disregard in para. 14(1)(e).

 

30. The agreement is said to have arisen in the following way. On 3 March 1995 the Metropolitan Police Service wrote to the Claimant stating that she had been awarded a lump sum payment by way of injury benefit. The letter enclosed a “Notice to Beneficiaries” and a form, to be signed by the Claimant, headed “CONDITIONAL INJURY AWARDS

RECEIPT OF NOTICE TO BENEFICIARIES”

 

31. The letter of 3 March 1995 included the following:

 

“The lump sum injury Benefit is conditional because where there is a possibility that damages may be recovered or compensation paid, the award is subject to review. It may then be reduced or totally extinguished by the value of all or part of any damages or compensation that may be awarded to you. In this event I must emphasise that the Receiver always seeks to recover all or part of the conditional payments made under Section 11 of the pension scheme if the beneficiary recovers damages which include an element in respect of loss of earnings or dependency. Please read the enclosed notice to beneficiaries about these conditions as it is most important that you understand the terms under which the conditional award is granted………Would you also please sign the enclosed receipt of notice to beneficiaries and return it …..”

 

32. The “Notice to Beneficiaries” explained that the Receiver for the Metropolitan Police District had the right to require repayment of some or all of the payments made in respect of an injury award if the claimant subsequently received damages in respect of the injury. It then in the second paragraph stated that

 

“It is also a condition of the award that the beneficiary ….. should notify Superannuation Branch promptly in the event of the injury giving rise to the award becoming the subject of a claim for damages, and when any such damages are paid or become payable, either to the beneficiary, or into Court, or to some person for or on behalf of the beneficiary.”

 

33. The Receipt of Notice to Beneficiaries, which the Claimant signed on 10 March 1995, stated that “I [Claimant’s name and address set out] have received the Notice to Beneficiaries ……. and accept the contents thereof.”

 

34. Mr Robertson further contends that, even apart from the agreement arising from the signature of the above document, the injury benefit was paid pursuant to an “agreement” in that the awarding authority had a discretion whether to pay it, and decided to do so.

 

34. I give permission to appeal in respect of the additional ground. It does not seem to me that the Council has been in any way prejudiced by it having been raised late.

 

35. I do not find it necessary to consider whether, if the contention based on a subsequent agreement had been a good one, the First-tier Tribunal could be said to have been in error of law, whether by way of a breach of natural justice or otherwise, such as to enable the Claimant now to take advantage of the point in this appeal even though it was not raised before the First-tier Tribunal. Had the contention been a good one, I would have been strongly inclined to find some error of law on the First-tier Tribunal’s part.

 

36. In my judgment, even if this contention, and the evidence relied upon, had been deployed before the First-tier Tribunal, the Tribunal could not properly have found that the payments of injury benefit were “received by virtue of an agreement ….. to make payments to the claimant in consequence of any personal injury to the claimant”, within the meaning of para. 14(1)(e) as construed in Malekout.

 

37. In agreeing that the award was made subject to the condition that it would be repayable to the extent of any damages recovered, the Claimant was in effect doing no more than acknowledging one of the conditions set out in the Rules of the PCSPS (or rather its predecessor). Mr Robertson said that, in agreeing to notify the Superannuation Branch of a claim for damages or damages award, or when damages were paid into Court, the Claimant went beyond her obligations under the Scheme, which contains no such obligation to notify. I suspect that such an obligation is implicit, but whether it is or not, it was clearly reasonable to impose such a condition, given the terms of para. 11.19 of Appendix 16 to the PCSPS (as it is now). It in my judgment makes no sense to say that the injury benefit was received by virtue of such agreement as resulted from signature of the Receipt of Notice to Beneficiaries. In my judgment it was in substance received under and by virtue of the provisions of the Scheme, which were incorporated in the Claimant’s contract of employment, and not by virtue of the agreement. Where a claimant claims damages in tort and is either awarded damages by a Court, or a compromise agreement providing for payment of damages is entered into, it is realistic to speak of the payment being received by virtue of the Court Order or the agreement. But that is not in my judgment so where a payment is provided for under the terms of the Scheme, and following the injury an agreement is then entered into in relation to what are essentially subsidiary matters which are in any event covered by the Scheme.

 

38. Further, the fact that payments of injury benefit under the Scheme are in theory discretionary does not in my judgment mean that the payments are received by virtue of an agreement made subsequent to the injury. The Claimant had an expectation that payment would be made, and the payment was in substance received by virtue of her contract of employment and the Rules of the Scheme.

 

39. Similarly (and with reference to the submission noted in para. 22(4) above), if in the present case the Claimant had needed to take judicial review proceedings in order to establish her entitlement to or the quantification of the amount of injury benefit, and such proceedings had resulted either in an Order of the Administrative Court or a compromise agreement, it would not in my judgment have been right to say that the payments were received by virtue of the Court Order or the compromise agreement. The Order or agreement would merely have been giving effect to the Claimant’s entitlement, which derived form the contract of employment and the Rules. There is in my judgment a real difference, in this respect, between a Court Order or an agreement giving effect to rights resulting from a tortious injury, and one which gives effect to rights under a contract of employment or pension/injury benefit scheme.

 

40. I therefore also reject the additional ground of appeal.

 

 

 

Charles Turnbull

Judge of the Upper Tribunal

28 May 2012