Friends with Collateral Benefits?: consent recitals on loss of earnings in orders striking out settled personal injuries actions and the recovery of state benefits from tort damages

• Author: David Keane
• Position: Judge of the High Court of Ireland
• Pages: 43-58

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[2020] Irish Judicial Studies Journal Vol 4(2)

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FRIENDS WITH COLLATERAL BENEFITS?

CONSENT RECITALS ON LOSS OF EARNINGS

IN ORDERS STRIKING OUT SETTLED

PERSONAL INJURIES ACTIONS AND THE

RECOVERY OF STATE BENEFITS FROM TORT

DAMAGES

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Abstract: This paper examines the law’s treatment of collateral benefits – and, more specifically, social welfare

benefits – in the assessment of damages for personal injury. In particular, it looks at the operation of s

343R(2) of the Social Welfare (Consolidation) Act 2005, as amended, and the widespread practice that has

emerged of the defendant in a settled personal injuries action applying on consent or unopposed for the inclusion

in the order striking out the proceedings of a recital addressing the nature or extent of plaintiff’s loss of earnings.

This is done for the purpose of limiting or eliminating the entitlement of the Minister for Employment Affairs

and Social Protection to reimbursement from the defendant of the social welfare benefits paid to the plaintiff

in connection with that injury.

Author: Mr Justice David Keane, Judge of the High Court of Ireland

Introduction

In Ireland, as in the United Kingdom,

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there are broadly three systems of accident

compensation. The first, provided through the commercial marketplace, is personal (or ‘first-

party’) insurance, although such insurance against personal injury is unusual. The second,

provided through the courts, is the personal injuries action. Though widely criticised,

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fault-

based tort liability is both deeply embedded in our law and ever more closely entwined – if

not, by now, inextricably bound up – with the ‘third-party’ insurance market. The third,

provided by the State, is social protection (or social security). By any measure, it is the most

equitable of the three and the one most widely relied upon, although it is not, of course, the

most comprehensive in its potential scope.

The complex interrelationship between these different systems raises difficult issues. It

informs the argument that the tort liability system lacks any coherent theoretical justification

in modern society.

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For Professor Atiyah,

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it contributes to the need for ‘a good hard look’

at the whole system of compensation for personal injuries.

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Such fundamental debates,

though plainly of great importance, are beyond the scope of this article.

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Eoin Hennessy made an early contribution to the research for this article.

2

Peter Cane and James Goudkamp, Atiy ah’s Accidents, Compensation and the Law (9th edn, Cambridge University

Press 2018), 10-11.

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ibid, ch 18.

4

Professor Steve Hedley, ‘The Unacknowledged Revolution in Liability for Negligence’ in Sarah Worthington,

Andrew Robertson and Graham Virgo (eds), Revolution and Evolution in Private Law (Hart Publishing 2018) 99.

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Who, sadly, died on 30 March 2018.

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Patrick Selim Atiyah, The Damages Lottery (Hart Publishing 1997) 173. Although, in the first edition of Accidents,

Compensation and the Law (Weidenfeld and Nicolson 1970), P rofessor Atiyah had argued that the tort system

should be abolished and replaced by the social welfare system, by 1997 he had changed his mind and, while still

advocating the abolition of the tort system, suggested its replacement with a no-fault insurance scheme for road

accidents, run by the private insurance industry, leaving compensation for all other accidents to the ‘first-party’

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The discussion that follows is directed to the practical question of how the law treats the

receipt of collateral benefits by a person seeking damages from a tortfeasor for personal

injuries and, more specifically, how it treats certain social welfare payments made to an

injured person in determining the damages that the tortfeasor must pay to th at person and

the social welfare payments that the tortfeasor must refund to the State. In particular, it

looks at the operation of s 343R(2) of the Social Welfare (Consolidation) Act 2005, as

amended. Under that provision, if an injured person’s loss of earnings or profits is the

subject of an order of the court or an assessment by the Personal Injuries Assessment Board

and the amount so ordered or assessed is less than that of the relevant social welfare

payments received by the injured person, then the compensator (almost always an insurer)

need only repay to the State the lesser amount.

Although they receive very little attention, such issues are not unimportant. As Professor

Lewis has commented on the lack of academic interest in the equivalent UK legislation, the

Social Security (Recovery of Benefits) Act 1997:

[A] wider point can be made here about the partiality of tort scholarship: it

concentrates excessively upon issues of liability as opposed to damages. This

bias is a remarkable one as far as practitioners are concerned. They are

bemused by the preoccupation of academics with rules on fault and cause. This

is because they are aware that, in practice, defendants and their insurers rarely

challenge liability. The issue is raised in less than 20 per cent of personal

injuries cases. By contrast, the amount of compensation is almost always open

to some negotiation.

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Collateral Benefits and Tort Damages

When a person is injured in an accident, he or she may receive benefits and assistance from

a variety of sources, such as an employer, an insurer, a family member, a benefactor, a charity

or, most obviously, the State. Any benefit or assistance obtained from one or more of these

sources exists quite apart from – or collateral to – any damages obtained from a responsible

tortfeasor. As Professor Lewis notes,

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this gives rise to two basic policy questions in the tort

system. First, to what extent should the damages payable by a tortfeasor be reduced to take

account of benefits or assistance received from other sources? And second, to what extent,

if any, should a person who provides some benefit or assistance to an injured person be

reimbursed by the tortfeasor? There are three possible solutions to those two questions.

The first solution is cumulation. Cumulation is the accepted term for the policy that there

should be no reduction in damages to take account of benefits or assistance received from

other sources. It might be said to represent the traditional position and has been embraced

most notably in the United States of America, where it is referred to as ‘the collateral source

rule’, formulated in the US Restatement of Torts as: ‘Payments made to or benefits conferred

on the injured party from other sources are not credited against the tortfeasor’s liability,

insurance marketplace, rendered affordable for all by the r emoval of ‘all the wasteful legal and administrative

costs associated with claims for damages and third party liability’, 185 – 193.

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Professor Richard Lewis, ‘Recovery of State Benefits from Tort Damages’ in TT Arvind and Jenny Steele

(eds), Tort Law and the Legislature (Hart Publishing 2013) (footnotes omitted) 285, 286.

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ibid, 289.