12.23 Putting contractual recovery rights aside, whether a restitutionary or a tort-based analysis of the third parties’ position is employed, the underlying question remains who, as between the provider and the tortfeasor, should ultimately bear the cost of the collateral benefit. If the tortfeasor, there are second-order questions about the form a recovery right should take. The position of the tort victim is, however, always relevant. In particular, if it is thought just for the tort victim to receive tort damages as if the collateral benefit had not been received, the inevitable consequence is that the provider should have no third party recovery right. Moreover if compensation of the tort victim is prioritised, any third party right should be designed so as not to cut across the victim’s claim.
12.24 Overall, our position in personal injury cases is that the only area in which the best answer to these questions is clear-cut is in relation to the provision of gratuitous services. We have explained our recommendations in that area in detail in Section A. Beyond this, we have expressed some conclusions in Section A regarding NHS recoupment. As to (other) collateral benefits, which we are here concerned with, we consider that whether or not there should be new third party recovery rights, and the form that these should take, is best left to the developing common law of restitution and of tort. In other words we do not think that the case for new third party rights is so clear cut that legislation is justified. At the same time we believe that there is scope for the relevant arguments to be aired and resolved in the course of common law development. We hope that this report will assist in that process. We explain below in further detail how we have reached this view, and in doing so advert to the opinions expressed by consultees.
(1) There should be no new statutory right to recover a (non-deductible) payment from the victim in the event of a successful tort claim
12.25 Of those who responded to this question, only 15 per cent supported the creation of statutory third party repayment rights, whilst 74 per cent thought that this should be left to common law development.20
Many consultees were opposed to statutory reform on reasoning which was expressed by Girvan J as follows:
It seems to me that the interests of those providing a collateral benefit can be easily secured by the provider himself making express provision to cover the situation of a recovery by the plaintiff of damages against a defendant.
20
Few consultees considered the Ontario Law Reform Commission’s proposal that damages covering the collateral benefit should be held by the victim on trust for the collateral source (but that the wrongdoer should additionally be entitled to make payment of such amounts direct to the collateral source). Only a very few actually supported the idea of a trust. See also paras 3.55-3.59 above for a discussion of the trust in relation to gratuitous services.
Other consultees who considered “automatic” recovery rights to be wholly unnecessary included Brooke LJ, Professor Andrew Tettenborn and the Association of Personal Injury Lawyers.
12.26 We agree that the option of “self protection” weakens the case for statutory reform. Moreover, no compelling arguments have emerged for enacting such rights for any particular class of collateral benefit providers. Should such arguments emerge, the common law has demonstrated itself to be perfectly able to develop so as to address them.21
12.27 In line with the views of the majority of consultees we therefore recommend that: There should be no new statutory right to recover a (non-deductible)
payment from the victim in the event of a successful tort claim for personal injury.
(2) There should be no new statutory right for the provider of a “deductible” collateral benefit to recoup its value from the tortfeasor
12.28 Of consultees who responded to the question, 88 per cent agreed with our provisional view that the reasoning of Slade J at first instance in Metropolitan Police
District Receiver v Croydon Corp22 is to be preferred to that of the Court of Appeal:
that is, that the payment under legal compulsion of a deductible collateral benefit does in reality benefit the tortfeasor by discharging his or her liability to the victim. However, only 50 per cent of those who addressed the question favoured the creation of a new statutory right to recoup the value of deductible collateral benefits from the tortfeasor. Moreover, some support for the creation of new rights was contingent on the adoption of Options 1 or 2 regarding deduction or not, both of which we have rejected above.
12.29 We have concluded that we should not recommend a new statutory right for the provider of a deductible collateral benefit to recoup its value from the tortfeasor. We are influenced by the limited support amongst consultees for statutory reform in this area. Again, many consultees considered it sufficient that collateral benefit providers can provide contractually for recoupment.
12.30 Still, it must be recognised that any development of the common law is impeded by the decision in Metropolitan Police District Receiver v Croydon Corp23 (subject to
the case of Land Hessen24
being regarded as having altered the position). We remain of the view that there is great force in the analysis of Slade J in the Metropolitan
21
Davies v Inman [1999] PIQR Q26 is an interesting case in this regard, since the courts awarded interest on damages for loss of earnings to be held on trust for an employer who had advanced the wages subject to an undertaking by the claimant to repay them from his damages. Roch LJ, who gave the only speech said at Q36: “There is, in my view, a public interest to encourage volunteers. It minimises hardship, especially if the voluntary payments mean that the injured party can maintain, whilst disabled, living expenses such as mortgage payments, rent and housekeeping bills.”
22 [1956] 1 WLR 1113 (QBD); [1957] 2 QB 154 (CA). 23 [1957] 2 QB 154. 24 Unreported, 31 July 1998.
Police case that in reality a tortfeasor benefits from the payment of sick pay to the
tort victim (even though the payment does not operate to discharge a crystallised liability, but rather has the effect that the tortfeasor’s liability does not ever arise). 12.31 Yet even if Slade J’s approach to “enrichment” was accepted, there should only be
a restitutionary right if the enrichment thereby caused was unjust. We found the following statement by Dr Charles Mitchell of interest in this regard:
It does not seem to me to be in the least obvious that a tortfeasor is necessarily the person who should bear the load of paying a victim when compared with an insurer who has been paid to compensate a victim, a government body which is required by statute to compensate a victim... or a carer who has acted under moral compulsion.
This suggests to us that, even accepting that a tortfeasor may “in reality” be enriched by the provision of a deductible collateral benefit, whether the enrichment is unjust is not invariably straightforward. This conclusion supports the case against legislation and for leaving the existence of a restitutionary claim to common law development.
12.32 We therefore recommend that there should be no new statutory right for the provider of a “deductible” collateral benefit to recoup its value from the tortfeasor.
(3) There should be no change to the law on indemnity insurers’ subrogation rights
12.33 Of consultees who considered our questions on this subject, 90 per cent agreed that we should not recommend the abolition of automatic subrogation rights for indemnity insurers. On the other hand, there was very little response to the related questions posed in the consultation paper: that is, as to whether the rights are justified, and whether they should be extended to the providers of other collateral benefits.
12.34 In the consultation paper, we noted that insurers’ subrogation rights are not confined to the personal injury context, but arise in relation to all forms of indemnity insurance. Many consultees therefore considered that the issue lay outside the scope of our project. For example, Professor J A Jolowicz QC said: ...the question... belongs in a review of the law relating to insurance,
not of the law relating to damages for personal injury. Brooke LJ expressed the same view:
I do not think the present paper is a good vehicle for exploring [these] issues... .
12.35 Further, many consultees explicitly agreed with our provisional view that the abolition of subrogation rights would require a detailed study of the implications for the insurance industry. For example, Girvan J said
This is an area which would require very careful investigation and careful consultation with the insurance industry.
Similarly, Horwath Clark Whitehill said:
The effect on the insurance industry should be fully researched before such a decision should be made.
12.36 Consultees have therefore confirmed our provisional view that we should not recommend the abolition of indemnity insurer’s subrogation rights in this report. Further, given that very few consultees considered whether subrogation rights should be extended to the providers of other collateral benefits, we do not recommend that subrogation rights should be extended.
12.37 Accordingly, we recommend that there should be no change to the law relating to indemnity insurers’ subrogation rights, and the providers of other collateral benefits should not be given analogous subrogation rights.