Many readers will have heard about the Court of Appeal judgment in Hassall and Pether v Secretary of State for Social Security [1994] Independent, 16 December.

The decision concerns the recoupment of social security benefits from compensation for personal injury where the plaintiff was unemployed prior to the accident.Statutory backgroundPrior to 1 January 1989, the relevant law was set out in s.2(1) Law Reform (Personal Injuries) Act 1948.

Under that regime, defendants could deduct from damages the total of certain social security benefits paid to the plaintiff after the accident.

However, a deduction could only be made against 'any loss of earnings or profits'.Where there was no such loss - because, for example, the plaintiff had been unemployed and would probably not have worked during the period in question - no deduction would have been permissible.

Defendants did not have to pay the sum deducted to the government.The Social Security Act 1989 introduced a new scheme.

The law is now contained in ss.81 to 104 of the Social Security Administration Act 1992 (SSAA).

The rules apply to the victims of an accident or injury suffered on or after 1 January 1989, or to a person who first claimed benefit in respect of a disease on or after that date.

They apply to out of court settlements as well as to payments ordered by the courts.Under s.82 of the SSAA, a 'compensator' must deduct a sum 'equal to the gross amount of any relevant benefits paid or likely to be paid to or for the victim during the relevant period in respect of [an] accident, injury or disease ...' and pay it to the Compensation Recovery Unit (CRU).

A 'compensator' is a per son who makes 'a compensation payment, whether on behalf of himself or another, in consequence of an accident, injury or disease suffered by any one person ("the victim") ...' (s.82(1)).'Compensation payment' is, in turn, defined in s.81(1) as 'any payment falling to be made (whether voluntarily, or in pursuance of a court order or an agreement, or otherwise) (a) to or in respect of the victim in consequence of the accident, injury or disease in question, and (b) either (i) by or on behalf of a person who is, or is alleged to be, liable to any extent in respect of that accident, injury or disease; or (ii) in pursuance of a compensation scheme for motor accidents, but does not include benefit or an exempt payment or so much of any benefit as is referable to costs incurred by any person'.Compensation awards of £2500 or under are exempted from the recoupment scheme.

Some types of award, of whatever amount, are also exempt, for example, payments by the Criminal Injuries Compens-ation Board.The 'relevant benefits' referred to in s.82 of the SSAA are defined in reg 2(1) of the Social Security (Recoupment) Regulations 1990.

They include unemployment benefit; sickness benefit; invalidity benefit; incapacity benefit; severe disablement benefit; both components of disability living allowance; attendance allowance; industrial injuries benefits; income support; and family credit.

Statutory sick pay is no longer included.The 'relevant period', also referred to in s.82, is a period of five years from the date of any accident or injury or from the date the victim first claimed a 'relevant benefit' in respect of the disease, unless the compensator makes a final payment before the end of that period, in which case the relevant period ends when the payment is made.Before a compensator may pay anything to the victim, he must first obtain a 'certificate of total benefit' from the CRU.

Under s.98(1) of the SSAA 1992, such a certificate may be challenged on appeal to a social security appeal tribunal on the ground '(a) that any amount, rate or period specified in the certificate is incorrect, or (b) that benefit paid or payable otherwise than in consequence of the accident, injury or disease in question has been brought into account'.The factsThe facts were similar in both cases, but I will concentrate on Mr Hassall.

He was unemployed at the time of the accident, and had been receiving unemployment benefit, topped up by income support (IS) because his total income was less than his 'applicable amount' within s.124(5) of the Social Security Contributions and Benefits Act 1992.After the accident he received roughly the same amount of benefit, but now in the form of sickness benefit topped up by IS.

However, the IS was paid on a different basis.

The normal requirement with IS is that a claimant has to be available for and actively seeking employment.However, there are various exemptions.

One of the exemptions is if the claimant is incapable of work (see reg 8(1) of, and para 5 of sched 1 to) the Income Support (General) Regulations 1987).

This exemption applied to Mr Hassall after the accident; it did not before the accident.

Mr Pether received IS only, both before and after the accident, but again the basis of his entitlement changed.Mr Hassall made no claim for loss of earnings because, on the balance of probabilities, he would not have been able to find work during the relevant period even had the accident not intervened.

His claim was settled for £22,500.

This was, it seems, simply for pain and suffering and loss of amenity.

He had r eceived post-accident benefits of roughly £7500 up to the settlement and these benefits were recouped by the CRU.

He therefore ended up with about £15,000.The argumentMr Hassall argued that the £7500 should not have been paid to the CRU.

He said it would be most unfair if he had to pay over the benefit he had received during the relevant period, because he would probably have continued to receive a very similar amount of benefit (as an unemployed person) in any event.There was another injustice too.

With IS additional amounts are paid to a claimant in respect of his partner and children.

Mr Hassall had a family.

The sum recouped included the element of IS paid in respect of his family.

In effect, therefore, the whole family had (retrospectively) been without any income during the relevant period.

Mr Hassall contended that the benefit had been paid 'otherwise than in consequence of the accident...' within s.98(1).Court of Appeal decisionLord Justice Henry, who gave the only substantive judgment, recognised the potential injustice.

He gave the example of an unemployed millionaire, who suffered the same injuries as Mr Hassall, and who neither received any social security benefit nor made any loss of earnings claim.

There would be no recoupment in his case and he would therefore recover the full amount, £22,500, compared to Mr Hassall's £15,000.However, the judge felt unable to construe the statutory provisions in a way that avoided recoupment.

The definitions are wide and there was no doubt, in his view, that the benefits had been paid 'in consequence of the accident'.

Although Mr Hassall was still getting IS, the post-accident form of the benefit had changed.

Similarly, the element of IS paid in respect of his wife and child had been paid in consequence of the accident.

The £7500 had been properly recouped.The solutionThe Court of Appeal did not, however, leave it there.

Henry LJ recognised that Mr Hassall had been under-compensated.

However, this was not because of the working of the statutory scheme, but because no claim had been made from the insurers, as it could have been, for loss of non-recoupable benefits.

These are the benefits that would have been paid during the relevant period, and not subsequently recouped, had the accident not happened.Henry LJ drew on obiter remarks of the Court of Appeal in Berriello v Felixstowe Tool and Railway Company [1989] 1 WLR 695.

Mr Hassall could have added the £7500 to his claim, such that he would have ended up with the £22,500 his pain and suffering merited.The judge was clearly satisfied that, with this solution, the unemployed benefit claimant would end up in the same position as the unemployed millionaire.

Neither would be under-compensated nor over-compensated.Whether the solution is complete is more debatable.

Most personal injuries actions settle, and it is in the nature of settlements that one does not necessarily get all one asks for.

Plaintiffs may not recover as damages all their non-recoupable benefits.Lesson from the judgmentIt is extremely important that solicitors should include claims for the loss of benefits which would not, but for the accident, have had to be recouped.

To fail to do so may well be negligent.Political postscriptAccording to the Independent on 20 February, a campaign to abolish or reform the CRU is gathering momentum.

A Labour MP has tabled an early day motion calling for its abolition and this has been signed by over 200 MPs.

The Commons social security select committee is holding an inquiry into the CRU and the Law Soc iety has also added its voice to the mounting criticism.In January, Paul Boateng MP, in a parliamentary question, asked what research had been conducted into allegations that the government received a greater sum from the benefit claw-back scheme for legally aided litigants than it actually paid out in civil legal aid to those litigants.In his reply John Taylor, the Lord Chancellor's representative in the Commons, said that no differentiation was currently made between legally aided and non-legally aided plaintiffs, but that consideration was being given as to how this information might be collected.