Withholding recoverable benefits from a payment into court; defendants cannot amend notice of payment in when certificate of recoverable benefits is later reduced to nil.

C in the course of his employment with D1, slipped in D2's premises, and strained his back. He had pre-existing back problems. 1½ years later he was medically retired due to his back. Another 1½ years later he commenced proceedings against both Ds. His supporting medical report attributed 2 – 3 years post accident symptoms to the accident and the rest to the pre-existing condition.

Ds denied liability. They served a medical report attributing only 1 year to the accident. Following further disclosure of C’s pre-accident records, they served a supplementary report attributing next to nothing to the accident and everything to the pre-accident condition. This report although served was mislaid by C’s solicitor such that its contents were never taken into account by C or his advisors.

The CRU certificate, 4 years post accident, certified the entire post accident benefits (£40,0000) as having been paid in consequence of the accident.

Ds made a payment into court, consisting of £6,000 paid into court plus £40,000 withheld under s.8 the Social Security (Recovery of Benefits) Act 1997, the gross payment in was stated to be £46,000. Within 21 days C filed and served acceptance of the £46,000. The action was thus settled in that it was automatically stayed, C took the £6,000 out of court and got his costs and Ds paid the £40,000 to the CRU under s.6 of the 1997 Act.

The CRU reviewed the certificate in view of D’s supplementary medical report and reduced the recoverable benefits from £40,000 to nil and refunded the £40,000 to Ds.

C demanded from Ds the £40,000 outstanding balance of the £46,000 that he had accepted. Ds declined asserting that C was never entitled to gross compensation amounting to £46,000, that his claim was only worth the £6,000 he had received, that the £40,000 had only been included in the notice of payment in because of the 1997 legislation and that C was not entitled to the refund.

C returned to court for an order lifting the stay and ordering Ds pay him the £40,000. D resisted on the grounds he had no entitlement. In the alternative they cross-applied for permission to amend the notice of payment in to remove all reference to the £40,000 and thus retrospectively change the gross value of the payment in from £46,000 to £6,000.
HHJ Reid QC (Clerkenwell County Court) (16.5.00) HELD: Because Ds had chosen to include the entire £40,000 within the gross payment in, then under Regulation 11 of the Social Security (Recovery of Benefits) Regulations 1997, they were now obliged to pay the entire CRU refund to C. To allow D to retrospectively amend the Notice required exceptional circumstances. None were present. Rather Ds were the victim of foolhardy behaviour in choosing to use the entirety of the then certified payments to increase the gross value of the payment in.

D appealed. As this had been a final order from a county court judge in an unallocated case, the appeal lay to the High Court. Ds abandoned the appeal in relation to C’s statutory entitlement but persisted with the appeal against the refusal to allow them to amend the notice of payment in. They also admitted liability for C’s accident so that he could not claim that if was he refused the reduced gross payment in he would now find it difficult to prove liability after all these years.

On appeal (sub nom Hilton International v Smith) Pitchford J (6.10.01) HELD: Ds’ solicitors had not understood the 1997 legislation when they drew up the notice of payment in. C had indeed obtained an extra windfall of between about £6,700 and £40,000 (depending on what conclusions a trial court would have reached when assessing damages); however this windfall was what Ds had offered him when they chose to include the entire £40,000 in the gross payment in. These were not exceptional circumstances. The judge below was right. Appeal dismissed.

COMMENT: This case highlights the commonly held but mistaken belief that what is refundable by the Defendant to the State must therefore be withheld by the Defendant from compensation to the Claimant such that it must be included within the gross value of payments into court. This case makes clear that a defendant in fact has a choice whether to withhold sums and, if so, how much. It also makes clear that if the defendant decides to withhold sums from payments into court and, following a later reduction of the amount refundable to the State, he is no longer entitled to withhold these sums, then he is stuck with the consequences of his original decision. His error as to the workings of the interrelationship between his duty to repay recoverable benefits to the CRU and his entitlement to withhold some or all of those benefits from compensation payments are not exceptional circumstances entitling him to relief from the consequences of his error.