AS TO THE ADMISSIBILITY OF

Application No. 28918/95

by Brian STEVENS and Ronald KNIGHT

against the United Kingdom

The European Commission of Human Rights (First Chamber) sitting in private on 9 September 1998, the following members being present:

MM M.P. PELLONPÄÄ, President

N. BRATZA

E. BUSUTTIL

A. WEITZEL

C.L. ROZAKIS

Mrs J. LIDDY

MM L. LOUCAIDES

B. MARXER

B. CONFORTI

I. BÉKÉS

G. RESS

A. PERENIČ

C. BÃŽRSAN

K. HERNDL

M. VILA AMIGÓ

Mrs M. HION

Mr R. NICOLINI

Mrs M.F. BUQUICCHIO, Secretary to the Chamber

Having regard to Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms;

Having regard to the application introduced on 25 May 1994 and 13 July 1995 respectively by Brian STEVENS and Ronald KNIGHT against the United Kingdom and registered on 12 October 1995 under file No. 28918/95;

Having regard to:

- the reports provided for in Rule 47 of the Rules of Procedure of the Commission;

- the observations submitted by the respondent Government on 11 July 1997 and the observations in reply submitted by the applicants on 2 December 1997;

Having deliberated;

Decides as follows:

THE FACTS

The applicants, two British citizens, born in 1931 and 1945 respectively and living in Kent, are unemployed.  Before the Commission, they are represented by Mr James Bancroft , a solicitor practising in Kent.

The facts of the case, as submitted by the parties, may be summarised as follows.

A. Particular circumstances of the case

The first applicant

On 28 March 1989 the applicant, who was then working as a foreman on a building site, suffered serious injuries due to an accident at work.  The medical report described the applicant's injuries as follows:

"The [applicant] ... fell some 2 metres landing on his back and right shoulder ... [In the hospital] he was ... x-rayed and found to have sustained a fracture of the surgical neck of the right humerus .  The following day x-rays were carried out to the right knee and right foot and the x-ray of the right foot revealed a fracture of the right first metatarsal bone. ... [He] developed a shoulder/hand syndrome and a course of injections were carried out which were of little benefit. [He] has continuing aching pain across the neck, right shoulder, right wrist and hand which becomes severe if he attempts to lift his right hand any higher than the waist of his body. ...  There is a lack of grip power in the right hand and he can no longer close the fist of the right hand fully. ... There is further restriction in the movement of the right elbow joint, the right wrist joint, the various joints of the fingers of the right hand and the power of the muscles in the right shoulder and elbow region are approximately 50% of the normal left side.  Grip power for large objects in the right hand is restricted to approximately 60% of the normal left hand and grip power for small objects in the right hand is diminished to approximately 30% of the left hand.  ... It is unlikely that the [applicant] will work again and if he does work he will be at continuing risk on the labour market."

After the accident, the applicant applied to the Department of Health and Social Security for sickness benefit and invalidity benefit. He was granted sickness benefit from 6 April to 10 October 1989 and invalidity benefit from 11 October 1989 to 28 March 1994.  These payments constituted recoverable benefits under the Compensation Recovery Scheme ("the Scheme").  The subsequent certificate of total benefit specified that the benefits amounted to £38,793.65.

On 7 June 1990 the applicant issued proceedings for damages for personal injury and loss occasioned by negligence against the Norlec Ltd., the company for which he was working at the time of the accident.  By instituting this action, the applicant sought to recover special damages, i.e. damages for loss of earnings and compensation for other quantifiable losses occasioned by the accident.  He further sought to recover general damages, to compensate for his pain and suffering, loss of amenity and loss of earning capacity.  The schedule of special damages dated 3 March 1993 set out the total figure for past loss of earnings incurred at £41,685.06 and for hospital visits and costs of replacing two pairs of shoes (as a result of the applicant's injury, his right foot size changed from size 10 to size 11) at £254.65.  The applicant also claimed in respect of continuing loss of earnings to retirement as he was unlikely to work again.

The applicant was advised by his counsel that general damages for pain and suffering and loss of amenity would be between £10,000 and £12,000, with a total claim for damages amounting to between £50,000 and £55,000.

On 16 October 1991 the applicant had a further accident at home causing additional injuries.

On 22 March 1994 the solicitors for the defendant, having received the certificate of total benefit, re-iterated an offer for final settlement in connection with a payment into court of £2,500 (first made on 17 March 1991) pointing out that this was a small payment exempt from the operation of the Scheme and that there was, in their view, no realistic possibility for the applicant to obtain judgment for a sum in excess of that which would permit him to keep more than £2,500.

At the end of March 1994 the defendant's solicitors made a further payment into court amounting to £38,793.65, i.e. the amount of benefits paid to the applicant in respect of benefits received from the date of the accident.  Upon advice by counsel and his solicitors the applicant accepted this payment into court.  Counsel provided written reasons for accepting the payment and concluded as follows:

"Taking into account Mr Stevens' age, the appropriate multiplier to age 65 would have been 8 ...  However, in this case there was a serious risk that a judge would find, taking into account my client's past work history and taking into account also the termination of business by the Defendant company [in December 1990], that a loss of earnings claim for more than two years was not sustainable.  On the basis that general damages would be assessed at £11,000 (that is the median figure) this gave the claim a value of £27,000.  Taking into account the possibility of a finding of contributory negligence of 20%, this reduced the claim by £5,400 to £21,600.  On that basis, a payment in of £38,793 could not be rejected."

In line with the provisions of the Scheme, the total amount of this compensation was deducted and paid over to the Secretary of State, and the applicant was left without any compensation for pain and suffering, loss of amenity and loss of earning capacity.

Following the acceptance of the payment into court, the applicant appealed the assessment of the amount of benefit paid to him as a consequence of the accident.  He claimed that any benefit paid after either (a) a period of two years from the date of his accident, as that would have been the maximum period for which the judge would have awarded loss of earnings (i.e. 29 March 1991) and in the light of the fact that the defendant closed down in March 1990 or (b) the date of his second accident (i.e. 16 October 1991), was paid otherwise than in consequence of his first accident as he would not only have been unemployed from 28 March 1991, but in any event, he would also have been unemployed and incapacitated from 16 October 1991 onwards.

On 5 December 1994 the Social Security Appeal Tribunal dismissed the applicant's appeal.

The second applicant

On 23 June 1989 the applicant, who was then working at the Taylor Brothers Ltd. and Needwood Holdings Ltd., sustained injuries.  The extent of his injuries was described as follows:

"The [applicant] sustained a crush injury to his left foot ... He suffered pain and shock, heavy contusion to the left foot with severe bruising and swelling, fractures of the gib toe, including first metatarsal and some fractures at the mid foot. ... The left foot continues to be stiff and uncomfortable, tender and affected by cold and damp. The [applicant] finds it difficult walking on uneven ground. ... As a result of the accident the [applicant] has already developed degenerative arthritis in carious of the joints.  There will be no further recovery and the [applicant] is significantly inconvenienced and disadvantaged in his social, work and domestic life."

After the accident, the applicant was paid statutory sick pay through his employers for the period from 7 July to 3 November 1989.  He further applied to the Department of Health and Social Security for industrial injuries disablement benefit.  He was granted this benefit for the period from 11 October 1989 to 22 June 1994.  These payments constituted recoverable benefits under the Compensation Recovery Scheme.  The subsequent certificate of total benefit specified that the benefits amounted to £6,465.56.

On 19 May 1992 the applicant instituted proceedings for damages for personal injury and loss occasioned by negligence against his employers.  He attached to his claims a schedule of special damages, (amended on 23 February 1995), i.e. damages for loss of earnings occasioned by the accident which amounted to £4,676.14 for past loss incurred.  As to future losses, the applicant claimed his handicap on the labour market and loss of future earnings but he did not quantify it.  By instituting this action, the applicant further sought to recover general damages, to compensate for his pain and suffering, loss of amenity and loss of earning capacity.

On 7 March 1995 the Dartford County Court ordered the first defendant to pay £20,000 damages to the applicant as well as the legal costs of the applicant and of the second defendant.

On 16 March 1995 the first defendant discharged this judgment by paying £6,465.56 to the Compensation Recovery Unit in respect of benefits received by the applicant from the date of his accident.  Consequently, the applicant was left with the sum of £13,534.44.

B. Relevant domestic law and practice

The social security benefits in issue

Where a person is injured or incapacitated by accident or disease, that person may be entitled to receive certain social security benefits from the public purse.  The social security benefits relevant to the present case were statutory sick pay, sickness benefit, invalidity benefit and industrial injuries disablement benefit.

Statutory sick pay, sickness benefit and invalidity benefit are contributory benefits intended to provide a measure of earnings replacement whilst a person is unable to work due to incapacity.

Statutory sick pay, received by the second applicant, is an income-replacement benefit which was paid by employers to employees through their normal pay channels.  To receive statutory sick pay an employee must have had average earnings during the eight weeks before the start of his sickness which were at least as high as the lower earnings limit for the payment of National Insurance contributions.  During the relevant period, statutory sick pay was paid at a single rate, and employers were able to recover a percentage of their statutory sick pay from the State.  After an employee had received statutory sick pay for 168 days (24 weeks) within a period of interruption of employment, he was deemed to have met the requirements for entitlement to invalidity benefit.

Sickness benefit, received by the first applicant, is intended to provide a measure of earnings replacement whilst a person is unable to continue with his employment due to incapacity for work.  At the relevant time, payment of sickness benefit was limited to a total of 168 days (24 weeks), after which invalidity benefit would become payable.

Invalidity benefit, received by the first applicant, is an earnings replacement benefit, which is paid at a basic personal rate.  It becomes payable after statutory sick pay or sickness benefit has been received for 168 days (24 weeks), and can then be paid indefinitely.

Industrial injuries disablement benefit, received by the second applicant, is the main benefit payable under the industrial injuries scheme which provides non-contributory, no-fault benefits for disablement caused by accidents at work or by one of the listed prescribed industrial diseases.  The scheme only covers disablement suffered at work at a time when a person is an employed earner as defined for National Insurance purposes.  The armed forces and the self-employed are excluded from the scheme.  Industrial injuries benefits are generally payable in addition to other sickness and invalidity benefits and are taken into account as income in calculating entitlement to income related benefits.  They are tax-free and are paid regardless of whether the recipient is working at the time of payment and regardless of his earnings, if any.  Industrial injuries disablement benefit is paid weekly after 90 days (15 weeks) from the date of the industrial accident or the onset of the prescribed disease.  The rate depends upon the degree of disablement, which is assessed at a percentage level of disability.  In principle, it is subject to a minimum threshold of 14% disablement.  It is not an income-replacement benefit, nor one to meet specific expenses, but a compensation for a non-pecuniary loss, directly linked to the degree of disablement arising from the work injury.

The Compensation Recovery Scheme

The Compensation Recovery Scheme ("the Scheme") was introduced by the Social Security Act 1989 and subsequently consolidated in the Social Security Administration Act 1992 ("the 1992 Act"). The 1992 Act received Royal Assent on 21 July 1989, and under transitional arrangements it applied only to compensation payments made on or after 3 September 1990 (the date of the coming into force of Section 22 of the Social Security Act 1989) where, in injury cases, the injury had been sustained on or after 1 January 1989 (Section 81(7) of the 1992 Act).

The Scheme was based upon the principles that negligent parties should not have any of their liabilities met through the social security system and accident victims should not be compensated twice.  The Scheme operated on the general principle that when a negligent wrongdoer or " compensator " made a payment of compensation to an injured person, that person was required to repay to the Compensation Recovery Unit an amount equivalent to any sums already paid by way of prescribed social security benefits which were claimed and received in consequence of that injury.  That sum was, in practice, paid directly to the Compensation Recovery Unit by the compensator .  The prescribed benefits which were recoverable included the four benefits relevant to the present application.  The Scheme applied whether or not liability had been admitted, and whether following an award of damages by a court or an out-of-court settlement.  The injured person must have been given formal notification of the amount deducted by the compensator in a certificate of total benefit.

The principle of recoupment was subject to certain modifications.  Only sums actually paid up to the date of an award/settlement or for five years, whichever period was the lesser, were recouped (Section 81(1) of the 1992 Act).  No future entitlement to benefits was taken into account.  Compensation was not recouped where the settlement was £2,500 or less ("the small payment limit"), or where an injured person received payment under a private insurance policy which he had purchased (Sections 81(3) and 85 of the 1992 Act).  The Scheme included an appeal mechanism, under which an individual could challenge the amount, rate, period or benefits specified in his or her certificate of total benefit (Section 98 of the 1992 Act).

Section 93(2)(a) of the 1992 Act provides that "where a party to an action makes a payment into court which, had it been paid directly to the other party, would have constituted a compensation payment, the making of that payment shall be regarded for the purposes to this Part of this Act as the making of a compensation payment, but the compensator may withhold from the payment into court an amount equal to the relevant deduction".

The Scheme was reformed by the Social Security (Recovery of Benefits) Bill which received Royal Assent in March 1997 and which came into force in October 1997.  The basic principles remained unchanged, but the compensator became liable for all recoverable benefits and is able to off-set this liability against compensation otherwise payable to the injured party on a "like-for-like" basis.  Compensation for pain and suffering is, therefore, protected.  Moreover, the small payments limit has been discontinued.

COMPLAINTS

The applicants allege violation of Article 1 of Protocol No. 1 to the Convention, Article 6 para. 1 and Article 14 of the Convention.

In connection with Article 1 of Protocol No. 1 to the Convention, they complain that they have been deprived of the fruits of their National Insurance contributions, bringing into play the requirements of "fair balance" and proportionality.  The first applicant was deprived of the whole amount of the settlement he had received for civil claim.  He was left with nothing under the Scheme, which was applied to his case, notwithstanding that it related to an accident which had occurred months before the Scheme was first enacted.  The second applicant whose damages were only partly recouped, claims that he suffered a substantial injustice in this regard.

With regard to Article 14 of the Convention read in conjunction with Article 1 of Protocol No. 1 to the Convention, the applicants claim that the operation of the Scheme constituted unjustified discrimination against them.  They point out that the Scheme draws a distinction between persons who receive awards of less than £2,500 (who do not face recoupment ) and persons (like the applicants) who receive higher awards.  They suffered discrimination compared with persons who suffered lesser injuries. The applicants also submit that persons with private insurance schemes do not have to bring such payments into account in claims against wrongdoers.  The benefits can be kept and damages recovered.  The discrimination is heightened in that no recoupment whatsoever of State benefits occurs from payments made under such schemes.  The applicants, however, have had to endure total recoupment , with no allowance made for their contributions to National Insurance, and the recoupment extending to their compensation for pain and suffering.  This discriminatory treatment is unjustified.  The injustice was magnified by the retrospective nature of the Scheme, which deprived the applicants of any opportunity to make private insurance provision before their accidents and against the knowledge of how crucial such provision would be should they suffer injury at work.  Instead they relied upon the adequacy of National Insurance provision and the protection of the civil law.  The applicants submit that applying the law to accidents that occurred before its enactment was grossly unfair.

The applicants argue, under Article 6 para. 1 of the Convention, read alone or in conjunction with Article 14 of the Convention, that the Scheme gravely interfered with their ability to pursue their actions for damages for personal injury before the courts.

PROCEEDINGS BEFORE THE COMMISSION

The application was introduced on 25 May 1994 and 13 July 1995 respectively, and registered on 12 October 1995.

On 9 April 1997 the Commission decided to communicate the application to the respondent Government.

The Government's written observations were submitted on 11 July 1997.  The applicants replied on 2 December 1997, after two extensions of the time-limit for that purpose.

On 16 September 1997 the Commission granted the applicants legal aid.

THE LAW

1. The applicants complain under Article 1 of Protocol No. 1 to the Convention that they have been deprived of the fruits of their National Insurance contributions, bringing into play the requirements of "fair balance" and proportionality.  The first applicant was deprived of the whole amount of the settlement he had received for his claim.  He was left with nothing under the Scheme, which was applied to his case, notwithstanding that it related to an accident which had occurred months before the Scheme was first enacted.  The second applicant whose damages were only partly recouped, claims that he suffered a substantial injustice in this regard.

Article 1 of Protocol No. 1 to the Convention provides as follows:

"Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties."

The Government submit that the claim in negligence itself is not, prior to final determination or settlement, enforceable and cannot therefore constitute a "possession" for the purposes of Article 1 of Protocol No. 1 to the Convention.  They submit that it is only the proceeds of the settlement that are capable of constituting "possessions".  They recall that a claim will only by a possession once it has "given rise to a debt ... that was sufficiently established to be enforceable" (see Eur. Court HR, Stran Greek Refineries and Stratis Adreadis v. Greece judgment of 9 December 1994, Series A no. 301-B, pp. 84-85, paras . 60-61).  The Government also submit that the social security benefits themselves are not capable of constituting "possessions", forming part as they do of a general insurance scheme based on the principle of social solidarity.

The Government further submit that the applicants' suggestion that the benefits payable to them were the "fruits" of their payments to the National Insurance Fund is misguided.  They stress that the National Insurance scheme is financed on an annual basis, such that the rates and levels of contributions are set each year to ensure that the overall income to the National Insurance Fund is sufficient to pay for all benefits due.  Although an individual's contributions provide a foundation for calculating entitlement to certain future personal benefits, the contributions do not actually pay for those benefits but rather for current benefits paid in that year. If recoupment of National Insurance benefits did not take place under the Compensation Recovery Scheme, an increased burden would inevitably fall on other contributors and taxpayers who had no connection with the accident in question and received no compensation in respect of it.  The Government stress that the National Insurance Fund is not designed to offer a guaranteed return on the payment of contributions, nor to cover all unexpected requirements such as the inability to work due to accident, injury or disease.  The system is based upon an arrangement whereby those who are working pay for the social security benefits of those who are, for example, retired, sick or unemployed.  Furthermore, National Insurance contributions do not only provide entitlement to certain of the benefits which are recoverable under the Compensation Recovery Scheme.  The Government note that a number of the benefits covered by the Compensation Recovery Scheme, such as income support, are not funded by National Insurance.  They add that in any event, it was not the benefits themselves which were recouped, but an amount of the settlement award equivalent to the benefits.

The Government go on to submit that even assuming that the proceeds of the settlements constitute a "possession" under Article 1 of Protocol No. 1 to the Convention, the recoupment should properly be characterised as control of the use of property that strikes a fair balance between the general interest of the community and the requirements of the protection of the individual's fundamental rights.  The Government argue that the principal aims behind the introduction of the Compensation Recovery Scheme in 1989 were the avoidance of double recovery by claimants, and the shifting of the burden from the taxpayer to the compensating wrongdoer.  They submit that the Scheme has operated fairly and in a proportionate manner in the present cases.  Only those benefits claimed and received by the applicants as a consequence of their accidents or injuries were recouped, recoupment occurred only up to a maximum level of the amount of compensation recovered, and no account was taken of future entitlement to benefits.  Furthermore, the applicants had claimed special damages for loss of earnings which exceeded (or would at the date of settlement or award have exceeded) the amount of benefits to be recouped, and there was therefore no necessary erosion of the "pain and suffering" element of the award.  The Government submit that the fact that the first applicant chose, or was advised, to settle his claim for a sum which, after recoupment , left him with nothing by way of damages cannot be laid at the Government's door.

The Government further submit that the benefits received by the applicants in the present case included statutory sick pay, to which specific reference was made by the Commission in its decision on the admissibility of application No. 28778/95 ( Kightley v. the United Kingdom, Dec. 9.4.97, unpublished).  In their view, sickness benefit and invalidity benefit can be similarly categorised as direct replacements for loss of earnings in the relevant period.  Furthermore, it was accepted in the Kightley case that the other benefits received by the applicant were properly set off against his award of damages.  The Government argue that there is no distinction of principle or logic between the Kightley case and the present application.  The mere fact that the extent of the injuries suffered and the damages consequently awarded in the Kightley case were greater than the present application  is, in the Government's view, irrelevant to the question of the compliance of the Scheme with the Convention.

As to the applicants' allegation that the retrospective application of the Scheme to accidents suffered before the Scheme entered into force, aggravated the alleged breaches of Article 1 of Protocol No. 1 to the Convention read alone or with Article 14 of the Convention, the Government submit that very often when a new scheme or law is introduced, transitional provisions are included to link the old and new rules.  Under Section 22 of the Social Security Act 1989 (now Section 81(7) of the Social Security Administration Act 1992) only accidents which occurred after 1 January 1989 were affected by the new provisions, and then only if an award had not been made or settlement reached by 3 September 1990.  This was intended to provide some opportunity for plaintiffs who wished to do so to settle claims prior to the coming into force of the new Scheme.  Referring to the Kightley case, the Government submit that retroactivity in civil legislation is not as such prohibited by Article 1 of Protocol No. 1 to the Convention.  Moreover, under the transitional arrangements the Scheme only applied to payments made on or after 3 September 1990, more than one year after the 1992 Act (in its original, 1989 form) had received Royal Assent.  The applicants in the present case were not able to reach settlements or obtain an award in their case before 3 September 1990, and the Scheme therefore properly applied to them.  The Government conclude that there was no retroactivity in the applicants' case even though they were injured on 28 March and 23 June 1989 respectively, which were dates between 1 January 1989 and 2 September 1990.

The applicants, with reference to the judgment of Pressos Compania Naviera S.A. and Others v. Belgium (Eur. Court HR, judgment of 20 November 1995, Series A no. 332) and the judgment of Stran Greek Refineries and Stratis Andreadis v. Greece (Eur. Court HR, judgment of 9 December 1994, Series A no. 301-B), argue that their claims for damages in tort for personal injury constituted "possessions" within the meaning of Article 1 of Protocol No. 1 to the Convention.  They further submit that they were entitled to payment of the benefits they received as soon as (and as long as) they satisfied certain established conditions.  None of these benefits were received merely on the basis of the exercise of a discretion in their favour by the Government.  In addition, more than a half of the benefits received were contributory benefits, the financing of which depended wholly or mainly on contributions by the applicants and their employers.  They stress that just as in a private insurance scheme, following the fulfilment of certain conditions, the "insured" was entitled to payment of a certain premium or benefit for the duration of the entitlement insured.  Consequently, the applicants were entitled to invoke the protection of Article 1 of Protocol No. 1 to the Convention to ensure the peaceful enjoyment of the benefits derived from their contributions to the National Insurance Fund.

The applicants further submit that contrary to the Kightley case to which the Government refer, the operation of the Scheme not only resulted in the recoupment of sums awarded by way of damages for loss of earnings for which benefits had been received but also in the recoupment of a large part (in the case of the second applicant) or even the totality (in the case of the first applicant) of any award for pain and suffering and future loss of earnings.

The applicants observe that the Government admit that all the relevant benefits (save for disablement benefit) are essentially loss of earning replacement benefits; it is only in relation to industrial injuries disablement benefit that the Government suggest that this benefit was "a compensation for a non-pecuniary loss".  The applicants submit that industrial injuries disablement benefit was introduced by the Social Contributions and Benefits Act 1992, and can comprise disablement pension, severe disablement allowance, reduced earnings allowance, attendance allowance and increased disablement pension.  They note that under the new Scheme introduced by the Social Security (Recovery of Benefits) Act 1997, the first three of these industrial disablement benefits are to be recovered only from compensation for earnings lost during the relevant period and only the latter two are recoverable from compensation for cost of care incurred during the relevant period.  Irrespective of this assessment of their purpose, the applicants maintain that under the Scheme these benefits were recouped from compensation unconnected with past loss of earnings or costs of care incurred.  Furthermore, in relation to invalidity benefit and sickness benefit, one of the fundamental conditions for eligibility was that the claimant had an adequate National Insurance contribution record.

The applicants add that the figures proved, in comparison with the Kightley case, a disproportionate impact of the Scheme in their cases.  Whereas Mr Kightley was left with 97.4% of his damages award, in the applicants' cases the Compensation Recovery Unit recovered excessive proportions of the overall damages which bore no relation to the special damages for past loss claimed: the first applicant was left with nothing out of the settlement of £38,793.65 (with his general damages estimated at between £10,000 and £20,000), in the case of the second applicant, the sum of £6,465.56 was recouped despite the fact that his claim for special damages only amounted to £4,676.14.  Accordingly, the operation of the Scheme amounted to an interference and, in the case of the first applicant, a deprivation of property, in relation to their claims in tort for damages for personal injury, their right to "peaceful enjoyment" of their social security benefits by virtue of the National Insurance contributions and the proceeds of their settlements of the actions.

The applicants further argue that the Scheme failed to strike a fair balance and has left them to bear "an individual and excessive burden" (what was acknowledged by the Government when the new 1997 Scheme was drafted).  They maintain that the lack of fair balance and/or proportionality is further demonstrated by the retrospective effect of the Scheme.  In fact, the incidents giving rise to the applicants' rights protected by

Article 1 of Protocol No. 1 to the Convention occurred before the 1992 Act (in its original, 1989 form) received its Royal Assent, i.e. 21 July 1989, and entered into force.  Nevertheless, the 1992 Act expressly applied to all accidents that occurred after

1 January 1989 thereby retrospectively applying to the accidents of the applicants and thereby retrospectively interfering with their property rights.  The applicants, with reference to the Commission's Report of 25 June 1996 in the National & Provincial Building Society and Others v. the United Kingdom case (Eur. Court HR, judgment of

23 October 1997, Reports of Decisions and Judgments 1997), add that the Government and the legislature went significantly further than merely seeking to prevent accident victims from benefiting from a "windfall"; they created a system that would, with retrospective effect, deprive the applicants of all or most of their damages award in relation to general damages as well as recovering those sums that could reasonably be described as a windfall.

Finally, the applicants submit that having regard to the fact that the average length of time that it takes to settle a case is about two and a half years (although one in ten takes more than six years) and even if their cases had been "average" cases having occurred on 2 January 1989, they were extremely unlikely to have been settled before June 1991.  In any event, they were neither "average" nor did they happen on 2 January 1989 but on 20 March and 23 June 1989 respectively.  The transitional period relied upon by the Government was therefore no more than illusory.

The Commission first recalls that Article 1 of Protocol No. 1 to the Convention guarantees in substance the right of property.  It comprises three distinct rules.  The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of peaceful enjoyment of property.  The second, in the second sentence of the same paragraph, covers deprivation of possessions and makes it subject to certain conditions.  The third, contained in the second paragraph, recognises that the Contracting States are entitled to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.  However, the three rules are not "distinct" in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property and should therefore be construed in the light of the general principle enunciated in the first rule (see, for example, Eur. Court HR, Tre Traktörer AB v. Sweden judgment of 7 July 1989, Series A no. 159, pp. 22-23, para. 54; Air Canada v. the United Kingdom judgment of 5 May 1995, Series A no. 316, pp. 36-37, para. 29).

The Commission considers that, as in the above-mentioned Kightley v. the United Kingdom case (No. 28778/95, Dec. 9.4.97, unpublished), the interference complained of in the present case was the result of the Compensation Recovery Unit's exercise of its powers under the Social Security Act 1989, as repealed and re-enacted, which provided for the Compensation Recovery Scheme.  The Scheme was based on the principle that there should not be double compensation for the same loss and that the burden should be shifted from the taxpayer to the compensating wrongdoer.  Where a person is injured or incapacitated by accident or disease, he or she may be entitled to claim certain social security benefits.  If the injury or incapacitation is caused by the negligence of a wrongdoer, the person may also be able to sue the wrongdoer for damages in tort.  When a payment of compensation is made, the person must repay to the Compensation Recovery Unit an amount equivalent to social security benefits which he or she claimed and received in the relevant period.

It was in the exercise of these powers that the sums of £38,793.65 and of £6,465.56 respectively were recouped by the defendants from the total damages awarded to the applicants and retained under the Scheme as representing benefits already received by the applicants.

Against this background, the Commission considers that the applicants' complaints fall to be examined under the head of "securing the payment of other contributions", within the rule in the second paragraph of Article 1 of Protocol No. 1 to the Convention.  That paragraph explicitly reserves the right of the Contracting States to pass such laws as they deem necessary to secure the payment of other contributions (see, mutatis mutandis, Eur. Court HR, Gasus Dosier - und Fördertechnik GmbH v. the Netherlands judgment of 23 February 1995, Series A no. 306-B, p. 48, para. 59).

The Commission considers that the principle that social welfare benefits are provided on the basis of immediate need, and may therefore be recovered by the State from a subsequent award of damages, cannot be said to be incompatible with Article 1 of Protocol No. 1 to the Convention as such.  It is not unreasonable to regard the social security benefits the applicants received before and pending resolution of their claims for damages as being in the nature of payments on account of their damages for their loss.

This is particularly clear where sick pay benefit, statutory sick pay and invalidity benefit are received, and then a figure is subsequently obtained by way of special damages for loss of earnings in the relevant period.  The Commission has already stated that the aim of any award of special damages is to put the victim of an accident in the same financial position as he would have been in if the accident had not happened.  A person who receives both his salary (by way of special damages) and the various welfare benefits for which he is eligible, has indeed, overall, received more money than if the accident had not happened (see No. 28778/95, Kightley v. the United Kingdom, Dec. 9.4.97, unpublished).

A similar principle applies to the further benefit received by the second applicant, namely industrial injuries disablement benefit.  As this benefit compensated the applicant for a form of non-pecuniary loss which was recoverable by way of an award of general damages, it is permissible to set it off against that part of the subsequent award of damages which compensated the applicant for pain and suffering, loss of amenity and earning capacity.

Article 1 of Protocol No. 1 also requires that there must be a reasonable relationship of proportionality between the means employed and the aim sought to be realised.  The requisite proportionality will not be found if the person concerned has had to bear an individual and excessive burden (see, for example, Eur. Court HR, Lithgow and Others v. the United Kingdom judgment of 8 July 1986, Series A no. 102, p. 50, para. 120).  In this connection the applicants complain that the Scheme led to the recovery of damages awarded for loss of earnings for which benefits had been received but also a large part (in the case of the second applicant) or even the totality of any damages (in the case of the first applicant) awarded for pain and suffering and for future loss of earnings, for which no benefit had been received.

At this point the Commission recalls that the first applicant claimed £41,685.06 for past loss of earnings and £254.65 for hospital visits and other costs.  He further claimed a continuing loss of earnings to retirement as he was unlikely to work again.  He settled his action by acceptance of the defendant's payment into court of £38,793.65, corresponding to the sum then recouped by the Compensation Recovery Unit in respect of benefits received from the date of the applicant's accident.

The Commission notes that the benefits received by the first applicant in the relevant period included sickness benefit and invalidity benefit, both categorised as direct replacements for his loss of earnings in the relevant period and recoverable by means of special damages.  The applicant accepted the payment into court upon his solicitors' advice as to the prospects of success of his claim in tort.  Further, in doing so, he was aware of the amount which was to be recouped by the Compensation Recovery Unit as a result of the benefits already paid to him and thus that his claim for general damages would remain unsatisfied.

The Commission acknowledges that the applicant's decision as to whether to accept an offer of settlement made by way of a payment into court was a difficult one.  If he accepted, he would at least receive his costs to date, even though he might actually receive nothing by way of general or special damages, the whole of the sum paid in being recouped under the Scheme.  On the other hand, if he did not accept, he ran the risk of losing his legal aid on the ground that it would not be reasonable to proceed with the case, and the further, and not inconsiderable risk, that he would not ultimately recover damages in excess of the sum paid in, and would have therefore personally to bear the costs of both sides.

However, civil litigation involves an assessment of the likelihood of success, whether as plaintiff or defendant.  The device of a payment into court enables a defendant to put pressure on a plaintiff to settle proceedings at an early stage, thereby saving costs for all and avoiding unnecessary use of costly court facilities.  Of particular relevance in the present case is that the amount of risk was a matter for the first applicant and his advisers.  The advisers were aware of the impact of the Compensation Recovery Scheme and the risks as to legal aid and costs; they were also aware of the strengths of their own case and the level of damages they could realistically expect to obtain if the case proceeded to trial.

The Compensation Recovery Scheme was thus just one element for the first applicant's advisers to consider in deciding whether to accept the payment into court.  Had the applicant been likely to receive a higher amount of damages, they may well not have accepted it, but from a Convention point of view, the Commission is unable to find that the operation of the Compensation Recovery Scheme can be regarded as disproportionate in the case of the first applicant.

The second applicant's schedule of special damages amounted to £4,676.14 for past loss incurred.  The applicant also claimed his handicap on the labour market and loss of future earnings but he did not quantify it.  The court agreed a total award of damages of £20,000 out of which the sum of £6,465.56 was recouped by the Compensation Recovery Unit in respect of benefits received by the applicant from the date of his accident.

The Commission notes that the applicant has not submitted the breakdown of his award of general and special damages and, therefore, the Commission is unable to establish to what extent the applicant's claims for damages were satisfied and what part of the sum awarded represented general damages and what part represented special damages.

The Commission considers that the sum of £13,534.44 the second applicant recovered after the recoupment under the Compensation Recovery Scheme depended directly on the total damages awarded by the court.  Had the total damages awarded by the court been higher, the applicant would, after the recoupment have recovered a bigger sum.  However, it is for the national court not for the Commission to assess the applicant's entitlement to and amount of damages.

The Commission notes that the benefits paid to the applicant in the relevant period, whose equivalent was then recouped by the Compensation Recovery Unit, included statutory sick pay categorised as income-replacement benefit recoverable by means of special damages, and industrial injury disablement benefit which, directly linked to the degree of the applicant's disablement arising from his accident, compensated him for a form of non-pecuniary loss, the same loss for which he sought to recover general damages.  Accordingly, the amount of damages which was recouped under the Compensation Recovery Scheme from the total damages awarded to the applicant by the court can be regarded as compensation for the same forms of losses for which he had already been paid through the National Insurance scheme.

In these circumstances, the Commission finds that the operation of the Compensation Recovery Scheme, leaving the second applicant with £13,534.44 cannot be regarded as disproportionate.

Finally, as regards the alleged retroactivity of the Act, the Commission recalls that retroactivity in legislation in non-criminal matters is not, in principle, prohibited by Article 1 of Protocol No. 1 to the Convention (see, for example, the National & Provincial Building Society, the Leeds Permanent Building Society and the Yorkshire Building Society v. the United Kingdom, Comm. Report 25.7.96, Eur. Court HR, judgment of 23 October 1997, to be published in Reports of Judgments and Decisions 1997).  In any event, the transitional arrangements of Section 22 of the Social Security Act 1989 and Schedule 4 to that Act entered into force on 3 September 1990, and apply to compensation payments made on or after this date.  The Commission finds that the provisions are not, therefore, retroactive, even though the accident may have taken place between 1 January 1989 and 2 September 1990.  The Commission took this approach in the above-mentioned Kightley case, and finds no reason to depart from it in the present case.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention.

2. The applicants complain, under Article 14 of the Convention taken together with Article 1 of Protocol No. 1 to the Convention, that the operation of the Scheme constituted unjustified discrimination.  They submit that there was an unjustified difference between the treatment afforded to those whose claims fell above and below the small payments limit of £2,500. They further submit that persons with private insurance schemes do not have to bring such payments into account in claims against wrongdoers.  The discrimination is heightened in that no recoupment whatsoever of state benefits occurs from payments made under such schemes.  The applicants claim that the retrospection in the Scheme deprived them of any opportunity to make private insurance provision before their accidents and against the knowledge of how crucial such provision would be should they suffer injury at work.  Instead, they relied upon the adequacy of National Insurance provision and the protection of the civil law.

Article 14 of the Convention provides:

"The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status."

The Government submit that the small payments limit was introduced in order to avoid disproportionate costs and complexity in recovery in small cases.  Their existence turned out in practice, however, to distort the proper functioning of the Scheme by pushing down the level of some settlements.  The Government add that the small payments limits are not to be retained under the new scheme which came into force in October 1997.

The Government further submit that the applicants' status as persons who had not purchased private accident or long-term disability insurance, and who were therefore solely reliant upon the social security benefits provided by the State, does not constitute a relevant criterion under Article 14 of the Convention.  Persons who have paid for voluntary private insurance and persons who have made compulsory National Insurance contributions are not relevantly similar classes for the purposes of this Article.  They add that any different treatment of relevantly similar groups is objectively justified.  The Government state that the National Insurance scheme is based upon compulsory funding, whilst private insurance is voluntary and any payments made under such a contract are a reward for thrift.  Furthermore, it is almost invariably the case that a private insurer will ensure that an insured person does not benefit from double recovery.  Under national law, if an insurer makes a payment under a private indemnity insurance policy, he stands in the shoes of a policyholder.  If the insurer subsequently finds that the policyholder has recovered the loss from another source, the insurer can then take action to recover his outlay from the policyholder.

The applicants maintain that though the terms of private insurance are not under the control of the Government, the latter is responsible both for the supervision of the insurance industry and the maintenance and justice of the civil justice system under which private insurance receipts cannot be taken into account when determining damages in tort.  They note that the description of the working of the National Insurance scheme in the Government's observations corresponds almost exactly to the  working of private insurance schemes against loss of earnings etc.  No "personalised" funds are created but the insurance premiums collected at any time are used to pay out to insured persons where the insured risk has materialised.  If during the life-time of the insurance policy the insured risk does not occur, the insured individual - just as under the National Insurance scheme - will not be entitled to any payment.  This principle also applies to such insurances as health insurance and/or pensions - if the insured risk does not materialise no entitlement to payment arises.  The applicants conclude that it is appropriate to compare their situation with that of a person covered by private insurance for the purposes of Article 14 of the Convention in relation to the interference with and/or deprivation of the property of the applicants in particular in form of any award for general damages and future loss of earnings.  The applicants add that private insurers will generally not be entitled to recover their insurance payments out of an insured's general damages but will ensure that any sum paid out is recovered by appropriate claims under special damages.

The Commission recalls that Article 14 of the Convention affords protection against discrimination, that is treating differently, without an objective and reasonable justification, persons in "relevantly" similar situations (see, for example, Eur. Court HR, Fredin v. Sweden judgment (No. 1) of 18 February 1991, Series A no. 192, p. 19, para. 60).

The Commission finds that the comparison between a person covered by national insurance and a person who has a private insurance contract is a comparison of two different factual situations, since private insurance is a matter which does not concern the State in any respect (see above-mentioned Kightley case) and as such discloses no discrimination under Article 14 of the Convention.  The Commission notes that the applicants could, at any moment before their respective accidents, have concluded a private insurance contract, but they did not do so.

With regard to the applicants' complaint concerning the retrospection of the Scheme and its discriminatory nature alleged by the applicants, the Commission has already examined the retrospective effect of the Scheme under Article 1 of Protocol No. 1 to the Convention and concluded that such a retrospective effect does not exist.  It therefore cannot see how the same complaint would amount to discrimination.

The applicants also base their allegations of discriminatory treatment on the fact that persons whose claims for damages fell below the small payments limit of £2,500 did not face recoupment .

The Commission notes that the applicants did not limit their claims, as they were entitled to do, to the sum of £2,500, with the consequence that any sum awarded would have been received free from any recoupment of the value of the benefits paid to them.  Furthermore, the first applicant did not accept the offer of final settlement in connection with the payment into court of £2,500 made by the defendant.  The applicants chose to claim sums substantially in excess of this figure in the knowledge that the value of such benefits would be recouped out of any sum awarded.

The Commission considers that the first applicant had the possibility of being in the same situation as persons whose claims for damages fell below the small payments limit of £2,500 and who did not face recoupment .

As to the second applicant, the Commission observes that the sum awarded by the court's judgment, even after the recoupment of the value of the benefits paid, left the applicant with an amount of damages substantially in excess of the figure of £2,500 and indeed of the value of the benefits.

In these circumstances, the Commission finds that the applicants have not been subjected to discriminatory treatment in violation of Article 14 of the Convention read with Article 1 of Protocol No. 1 to the Convention.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention.

3. The applicants finally argue that the Scheme gravely interfered with their ability to pursue their actions for damages for personal injury before the courts.  They invoke Article 6 para. 1 of the Convention, read alone or in conjunction with Article 14 of the Convention.

Article 6 para. 1 of the Convention, insofar as relevant, provides as follows:

"In the determination of his civil rights and obligations ... everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law ..."

The Government submit that the applicants were free to and did invoke their right to bring a claim for damages before the national courts in respect of the injury which they had suffered.  They were legally represented throughout those proceedings, and were freely able to choose whether to pursue their claim to judgment or whether to accept a payment in settlement at an earlier stage.  The Government note that the first applicant, who chose to accept a voluntary settlement, did so in full knowledge of the existence and effect of the Compensation Recovery Scheme, and having taken legal advice.  His allegation that he was de facto prevented from continuing the prosecution of his claim for damages, or that the essence of his litigation right was impaired, is, in the Government's view, without foundation.  For the rest, the Government rely upon the Commission's reasoning in the relevant part of the Kightley case.

The applicants submit that any offer of settlement by way of payment into court puts a plaintiff in the difficult position of deciding whether to accept such payment and have all his or her reasonable costs of the action paid, or to refuse such payment in and, if the final award does not exceed the payment into court, to pay his or her own and the defendant's reasonable costs as from the date of this payment.  Furthermore, where the plaintiff is legally aided in his or her personal injuries action and refuses to accept an offer of settlement that he is advised by his solicitor and/or counsel is reasonable, such legal aid may be withdrawn.  The applicants state that the combined effect of the Scheme and Rule of Court and/or legal aid provisions and/or the £2,500 threshold was such that the applicants were in fact, if not in law, prevented from pursuing their claim for damages in tort through the courts.

The Commission recalls that Article 6 para. 1 of the Convention embodies the "right to a court", of which the right of access, that is, the right to institute proceedings before a court in civil matters, constitutes one aspect.  However, this right is not absolute, but may be subject to limitations; these are permitted by implication since the right of access by its very nature calls for regulation by the State. In this respect, the Contracting States enjoy a certain margin of appreciation, although the final decision as to the observance of the Convention’s requirements rests with the organs of the Convention.  It must be satisfied the limitations applied do not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will not be compatible with Article 6 para. 1 of the Convention if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved (see Eur. Court HR, Stubbings and Others v. the United Kingdom judgment of 22 October 1996, Reports of Judgments and Decisions 1996-IV, p. 1502, para. 50).

The Commission first notes that the second applicant's claim for damages ended in an ordinary judgment of the court.

As to the first applicant, the Commission observes that he was able to bring his claim for damages before the national court.  He voluntarily accepted the defendant's payment into court in settlement of his claim, having refused the defendant's previous offer of £2,500 as a small payment which was exempted from the operation of the Scheme.  The Commission considers that the essence of the applicants' right of access to a court was not impaired.  Insofar as this right was inhibited by the provisions of the domestic law, the Commission does not consider that such an inhibition failed to pursue a legitimate aim of the avoidance of double recovery by claimants and the shifting of the burden from the taxpayer to the compensating wrongdoer, or that it was disproportionate.

The Commission adds that the first applicant's submissions do not raise any further relevant issue under Article 14 of the Convention.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 27 para. 2 of the Convention.

For these reasons, the Commission, unanimously,

DECLARES THE APPLICATION INADMISSIBLE.

  M.F. BUQUICCHIO    M.P. PELLONPÄÄ

     Secretary President

to the First Chamber of the First Chamber