1. Introduction
In many legal systems, a wide range of compensation sources is now available to victims of personal injury: tort law; private insurance; social security; and – perhaps playing a more hidden and the least well-understood role – compensation schemes. While the first three sources have attracted significant scholarly attention, the development of compensation schemes in England and Wales has, comparatively, gone mostlyFootnote 1 unnoticed.Footnote 2 This oversight is unfortunate, particularly given that these schemes have existed for a long timeFootnote 3 and continue to grow in number.
Despite this growth, accurately determining the number of operational schemes in England and Wales proves challenging, as many, particularly those that are industry-led, are developed covertly.Footnote 4 This lack of visibility obscures their development and raises fundamental questions: Why are these schemes needed? How do they interact with the tort system? Is there a coherent logic underlying their operation? While such issues have been explored in other legal systemsFootnote 5 or through comparative perspectives,Footnote 6 the English and Welsh legal system remains underexamined in this regard.Footnote 7
Yet, it is imperative to improve our understanding of how compensation schemes operate in England and Wales, given the increasing calls for the development of new schemes. Recent examples include the as yet unaddressedFootnote 8 proposals for a bespoke compensation scheme for adverse effects from Covid-19 vaccines,Footnote 9 and the Independent Medicines and Medical Devices Safety Review’sFootnote 10 (the ‘Cumberlege Report’) recommendations to create three specific compensation schemesFootnote 11 for victims of hormone pregnancy tests, sodium valproate, and pelvic mesh, as well as a general Redress AgencyFootnote 12 to oversee compensation for harm caused by medicines and medical devices. While the then Government showed a lack of appetite for these recommendations,Footnote 13 the situation may change following the publication of the ‘Hughes Report’.Footnote 14 Finally, the new Infected Blood Compensation Scheme (2024),Footnote 15 established following the findings of the Infected Blood InquiryFootnote 16 and designed to replace earlier, inadequate schemes, highlights the continued need for functional compensation schemes. Understanding the implicit rules underpinning current schemes, as well as their connection to the tort system, could facilitate more efficient reforms and the development of effective future schemes.
To gain this understanding, the paper will focus on a particular area where these schemes are significantly used. While compensation schemes are deployed across various sectorsFootnote 17 and situations,Footnote 18 this paper focuses on their role in occupational and public health in England and Wales. Three main reasons explain this focus: first, this area provides a highly fertile ground for the development of compensation schemes; secondly, narrowing the scope to a single context facilitates the identification of commonalities among them; and thirdly, practical constraints necessitate limiting the analysis, as the sheer number of schemes requires a prioritisation of what can realistically be addressed in a single paper. As a result, the compensation schemes examined in this paper include those for thalidomide, occupational dust-related diseases, variant Creutzfeldt-Jakob (vCJD), vaccine damage, and infected blood. However, the new Infected Blood Compensation Scheme (2024) stands out as a unique case among occupational and public health compensation schemes. Unlike others, it presents a highly unusual combination of characteristicsFootnote 19 which can be explained by its specific background,Footnote 20 and for this reason, this scheme will be excluded from the analysis.
Compensation schemes in the occupational and public health sectors are extremely diverse – varying in shape, size, structure, funding, and administration. To borrow Oliphant’s words, ‘it is hard to discern any particular pattern or logic behind them’,Footnote 21 reinforcing the perception that these schemes have developed haphazardly, unstructured and on a case-by-case basis. Contrary to this initial impression, however, this paper demonstrates that compensation schemes in the field of occupational and public health have not developed in as unstructured a manner as their apparent diversity might suggest. On the contrary, this paper contends that compensation schemes in England and Wales exhibit greater uniformity than is initially apparent, with their underlying logic deeply rooted in their relationship to the tort system.Footnote 22 As such, the paper contributes to the existing literature by identifying a crucial relationship between these compensation schemes and the tort system that explains the creation and use of the former as well as the place and limits of the latter. Examining these schemes through this lens reveals a clear pattern: the main motivation for their creation strongly influences the rules governing their operation. Recognising this pattern could help formalise some of the covert rules currently guiding compensation schemes in England and Wales and provide a foundation for designing future schemes at both national and international levels.Footnote 23
The paper is divided into four main sections. Section 2 lays the groundwork for understanding compensation schemes by defining the term and resolving a legislative debate on whether ‘payment schemes’ fall under the category of ‘compensation schemes’. Sections 3 and 4 propose a categorisation of compensation schemes in the field of occupational and public health. Section 3 explores the motivations behind the creation of compensation schemes and the contexts in which they are established, highlighting the important influence of the tort system in their emergence. Section 4 builds on this analysis by exploring how these motivations shape the design of compensation schemes. It argues that these motivations influence beneficiaries’ subsequent rights in tort law, including their ability to bring civil claims and the potential compensation available through the tort system. Finally, section 5 concludes by reflecting on the broader implications of the uncovered pattern, shedding light not only on the nature of compensation schemes but also on the place and limits of the tort system in England and Wales.
2. The meaning of ‘compensation scheme’
The introduction noted five areas in occupational and public health where compensation schemes have been used in England and Wales: (1) thalidomide; (2) occupational dust-related diseases; (3) variant Creutzfeldt-Jakob disease; (4) vaccine damage; and (5) infected blood. However, the inclusion of all corresponding schemes under the heading ‘compensation scheme’ is not without controversy. In common law literature, the term ‘compensation scheme’ (or compensation fund)Footnote 24 is often used but seldom defined. It generally refers to any scheme created specifically to provide compensation to certain categories of victims ‘whose damage is the consequence of certain circumstances, described by law’Footnote 25 or in a private agreement.Footnote 26
Yet, the terminology can sometimes be confusing, as some schemes are called ‘compensation schemes’ and others ‘payment schemes’. Those who emphasise the distinctionFootnote 27 argue that it lies in the intended purpose of the payment made to beneficiaries: compensation schemes are said to provide ‘compensation’ to beneficiaries, while payment schemes aim to offer ‘financial support’Footnote 28 to the specified group. Accordingly, proponents of this distinction contend that a payment scheme does not provide ‘compensation’ because otherwise a payment under the scheme would bar any subsequent civil proceedings for compensation.Footnote 29 With respect, this argument is unconvincing. It suggests that, unlike payment schemes, compensation schemes always prevent beneficiaries from claiming damages after receiving a payment. Yet, there are clear examples of compensation schemes that do not impose such a restriction.Footnote 30
Similarly, it has been suggested that the difference between compensation schemes and payment schemes lies in the fact that payment schemes do not compensate beneficiaries for their loss, or at least not for their pain and suffering, while compensation scheme do.Footnote 31 This could be an appropriate distinction except that when beneficiaries of payment schemes later receive a civil award, the value of that award – including the part relating to pain and suffering (general damages) – is reduced by the value of the lump sum payment distributed by the payment scheme.Footnote 32 The fact that this clawback is applied to general damages rather than just special damages clearly suggests that payment schemes do, at least indirectly, compensate beneficiaries for pain and suffering. Therefore, the purpose of the payment cannot serve as the distinguishing factor between compensation schemes and payment schemes.
In reality, the distinction between compensation schemes and payment schemes remains largely unclear and appears more ideological than practical.Footnote 33 It may simply reflect the reluctance of those who create ‘payment schemes’ to use the term ‘compensation’, which could remain associated with legal liability – particularly when the Government is the scheme’s architect. In these cases, the Government may establish redress schemes for one of two goals:Footnote 34 (1) to provide ‘support and relief’Footnote 35 as an expression of social solidarity; or (2) to avoid potential legal liability.Footnote 36 In the former case, the Government often refers to the schemes as a ‘payment scheme’, whereas the latter is more likely to be labelled a ‘compensation scheme’.Footnote 37
Nevertheless, since payment schemes do provide compensation to their intended beneficiaries in practice,Footnote 38 they will be addressed as ‘compensation schemes’ for the purpose of this paper.
3. The importance of the tort system in the creation of compensation schemes
All compensation schemes related to occupational and public health are connected to the tort system, although the nature of this connection depends significantly on how effectively the tort system manages liability claims. This section will show that a pattern emerges in which the connection to the tort system varies between non-statutory compensation schemes – those not created by statute – and statutory compensation schemes, which are established by statute. Specifically, it will demonstrate that non-statutory schemes are generally designed to divert liability claims away from the tort system, while statutory schemes are often introduced when the tort system is, in some way, unavailable.
(a) Non-statutory compensation schemes
Non-statutory compensation schemes in the field of occupational and public health – including those for coal dust, thalidomide, infected blood and vCJD – are often created on an ad hoc basis and are closely connected to the existence or potential existence of liability claims. For this reason, these schemes are generally the result of an agreement proposed by (at least) one defendant in such claims and can be further divided into two subcategories: (1) most are introduced because the defendant is exposed to legal liability; (2) fewer are established after the defendant is held legally liable. This proposed distinction not only highlights the tort system’s influence in the creation of non-statutory compensation schemes but also underscores the different ways it shapes their development.
(i) The defendant is exposed to legal liability
Non-statutory compensation schemes in this subcategory are extremely varied, with significant structural differences regarding the type of defendant (eg government department, nationalised or private company), the type of administrator (eg charitable trust, non-departmental public body, or private company), and even the source of funding (eg public or private funds, or a combination of the two). Notwithstanding, these schemes share two common features: (1) they are designed by a defendant who is exposed to potential (and potentially huge) legal liability; (2) payments under the scheme are always made ex gratia, ie on a voluntary basis, when there is no legal obligation or liability to do so.Footnote 39 Accordingly, defendants make payments through compensation schemes while explicitly denying any legal liability.
In most situations, the defendant proposing a non-statutory scheme is already facing liability claims, as seen in the case of thalidomide, infected blood, and coal dust. For thalidomideFootnote 40 and infected blood (HIV-infected haemophiliacs only),Footnote 41 the emergence of compensation schemes was connected to the settlements of specific group litigations, with the schemes’ outline included in the settlements themselves. In both situations, the defendants continued to deny any legal liability. In the context of coal dust, the Coal Workers’ Pneumoconiosis Compensation SchemeFootnote 42 (1974) was introduced not in response to a specific claim, but rather to address an unmanageable volume of claims against the scheme’s defendant. In Pickles v The National Coal Board,Footnote 43 a former employee of the National Coal Board (NCB) successfully applied ex parte for leave to bring an action in negligence and breach of statutory duty against the NCB despite being technically time-barred. This case, eventually settled, paved the way for a huge number of claims against the NCB to arise.Footnote 44 Following the decision, the NCB introduced this scheme in a bid to draw all legal claims initiated by its employees, coal miners suffering from pneumonoconiosis, outside the judicial framework.Footnote 45 The scheme was born out of an agreement between the NCB and the coal mining unions to preserve ‘the interests of the industry and those employed in it’.Footnote 46 Once again, no liability was admitted.
In other situations, the defendant may not yet be facing liability claims but is likely to do so in the future, as seen in the context of vCJD. The vCJD Trust was established before any legal proceedings were fully initiated in court, as families only instructed solicitors and filed lawsuits against the Government to prevent the statute of limitation from running.Footnote 47 The circumstances surrounding the establishment of this scheme shed light on its underlying motivation. Creutzfeldt-Jakob disease is mostly a sporadic disease affecting elderly people. In 1996, a new disease pattern, called variant CJD (vCJD), was discovered to affect people much younger than was usually the case with CJD.Footnote 48 Following the suggestion in the media – and later by the Secretary of State for HealthFootnote 49 – that there was a link between this new disease and the consumption of meat contaminated with Bovine Spongiform Encephalitis (BSE), families of victims began a campaign for a public inquiry. Following their efforts, the ‘BSE Inquiry’ chaired by Lord Phillips was established in 1998.Footnote 50 The final report, published in October 2000, concluded that vCJD was likely caused by BSE and identified areas of shortcomings in the management of the crisis.Footnote 51 Around the same time, families of the vCJD victims publicised their intention to bring legal actions against the Government.Footnote 52 Following the publication of the BSE Inquiry report, the Government announced that it would provide compensation to vCJD victims and their families, though it would not admit liability.Footnote 53 A briefing note addressed to the Secretary of StateFootnote 54 clearly outlines that the proposed scheme was designed ‘to reduce the incentive to bring litigation’,Footnote 55 and that ‘families are obtaining sums in the alternative to litigation’.Footnote 56 This demonstrates that, despite the denial of liability, the creation of the vCJD Trust was directly tied to the risk of legal liability, as the compensation was intended to prevent further litigation.
Whether the defendant is already facing liability claims (thalidomide, infected blood, and coal miners) or is likely to face such claims in the future (BSE/vCJD), their primary motivation appears to be to end or prevent legal proceedings. These non-statutory compensation schemes are designed as proactive responses to potential liability claims. This explains why they are often introduced before any judicial decision is made, allowing defendants to offer financial packages to victims while denying legal liability. Consequently, these schemes function as administrative vehicles for distributing payments outside the judicial framework. However, while defendants (or potential future defendants) use compensation schemes to avoid litigation, the underlying reasons for their desire to settle tort claims are more difficult to pinpoint.
The avoidance of costly litigation can be, in and of itself, a strong incentive for the settlement of liability claims, as the Coal Workers’ Pneumoconiosis Scheme (1974) illustrates. In the context of thalidomide, infected blood and BSE/vCJD – three of the most infamous public health scandals in modern British history – additional considerations may have influenced the defendants’ decision to settle the claims using a compensation scheme. The victims were numerous, the cases were high-profile, and public emotions ran high (sympathy for the victims, outrage vis-à-vis the defendants). The defendants felt the brunt of legal, media and political pressure all at once:Footnote 57 (1) legal pressure from victims through group litigations being, or about to be, initiated in courts; (2) media pressure from extensive coverage of the ‘scandal’, which generated public outcry; and (3) political pressure from hard campaigning led by victims’ associations giving their cause political momentum and support. In these circumstances, proposing a financial package and a compensation scheme became a good option for defendants to alleviate some of this pressure. Such measures demonstrate their acceptance of moral responsibility (but not legal liability) for the scandal and serve to appease both the victims and the public.Footnote 58
(ii) The defendant is held legally liable
Non-statutory compensation schemes established after a defendant has been found legally liable do not merely respond to the defendant’s exposure to legal liability, and payments made through these schemes are not distributed on an ex gratia basis. Although rare, such schemes are introduced specifically because the defendant has been found legally liable: they serve as settlement schemes designed to unclog the courts from evaluating individual awards where liability has been recognised towards a large class of claimants. For this reason, while the operation of the scheme is drafted in an agreement between the defendants’ and claimants’ legal representatives, it also needs court approval.
The Coal Health Compensation Schemes, described as ‘the largest personal injury schemes in British legal history’,Footnote 59 are a striking example of this type of settlement scheme. These two compensation schemes were established for the benefit of former miners suffering from chronic obstructive pulmonary disease (COPD) and vibration white finger (VWF) due to their work for the British Coal Corporation (BCC). In 1998, the BCC was found negligent regarding both COPDFootnote 60 and VWF.Footnote 61 Upon the corporation’s privatisation, all liabilities passed to the Department of Trade and Industry (DTI). By then, with over 740,000 claims,Footnote 62 it was clear that the ‘uniquely large volume of claims’Footnote 63 required the evaluation of individual awards through a non-judicial administrative process. Negotiations between the DTI and the solicitors’ groups representing the claimants resulted in two agreements approved by the court, defining how COPD claims (the COPD Scheme)Footnote 64 and VWF claims (the VWF Scheme)Footnote 65 would be managed.Footnote 66 Non-statutory compensation schemes established after a finding of liability can be seen as an extension of the judicial process, as the court generally continues to oversee their operation.Footnote 67 These administrative structures provide a convenient means to evaluate individual awards in a time-efficient manner and address any future potential claims that may incur similar liability.
In summary, non-statutory compensation schemes – whether created by a defendant exposed to liability or one that has been held liable – result from extensive negotiations between the parties, their legal representatives, and organisations interested in the matter (including unions or victims’ associations). The rules governing the operation of these schemes are generally the result of an agreement between the stakeholders.Footnote 68 More importantly, the main motivation behind these schemes is to move present and future legal liability claims away from the tort system. Consequently, defendants introduce non-statutory compensation schemes because claimants have the option of a tort action and appear willing to exercise that option to assert their (alleged) right to compensation. Thus, the availability and use of the tort system are critical to the emergence of non-statutory compensation schemes, a situation that contrasts significantly with the use of statutory compensation schemes.
(b) Statutory compensation schemes
Unlike non-statutory compensation schemes, statutory compensation schemes are not designed to circumvent the tort system and, as such, are not created by defendants in tort actions. Instead, in the context of occupational and public health, statutory compensation schemes have often been introduced because, to varying extents, the tort system was not a viable option for claimants. Some were created when the liable party disappeared or could not be found, others when no liable party existed, and some for victims with no real prospect of success in court. In this context, it can be argued that the tort system is effectively unavailable to these victims.
As a result, statutory schemes are often a legislative response to the inability of certain categories of victims to obtain damages through the tort system, reflecting a form of social solidarity. However, while this unavailability of the tort system is often an important factor in the creation of such schemes, it is not always sufficient on its own. Political motivations, societal recognition of affected groups, and the severity or public visibility of health conditions also play a role in determining why these schemes are created for some conditions but not others.
(i) The liable party disappeared or cannot be found
Two statutory compensation schemes provide compensation to victims of occupational diseases who are unable to sue the liable party – either because the liable party disappeared or cannot be traced: the first is the Pneumoconiosis etc (Workers’ Compensation) Scheme (1979); the second the Diffuse Mesothelioma Payment Scheme (2014).
The Pneumoconiosis etc (Workers’ Compensation) Act 1979 established a compensation scheme for sufferers of certain prescribed, lung-related occupational diseases. Although the scheme was initially designed to support Welsh slate quarry workers afflicted with pneumoconiosis, it has since become primarily focused on mesothelioma sufferers. Its creation was not solely a matter of public health; by addressing the needs of this important constituency for Plaid Cymru, the minority Labour Government aimed to secure political support ahead of the 1979 general election.Footnote 69 To qualify for the lump sum payment under the scheme, sufferers must prove, among other requirements, that ‘every relevant employer … has ceased to carry on business’Footnote 70 and that they have ‘not brought any action, or compromised any claim, for damages in respect of the disablement’.Footnote 71 These two rules clearly indicate that this compensation scheme is restricted to those who cannot obtain compensation through other means, including the tort system, because the liable party – the employer – disappeared. The then Minister of State in the Department of Employment confirmed that
the effect of these restrictions is to limit compensation to those who have no employer to sue and to avoid a situation in which the State would, in effect, be shouldering the responsibilities of existing employers as an alternative to their facing action in courts.Footnote 72
The same observation applies to the Diffuse Mesothelioma Payment Scheme (2014), a statutory compensation scheme established for mesothelioma sufferers who contracted the disease due to negligent occupational exposure to asbestos. Its focus on occupational mesothelioma is justified by the unique nature of the disease – fatal, exclusively caused by asbestos exposure, and often tied to negligent business practices – as well as the significant challenges victims face in tracing liable employers or insurers, given the long latency period between exposure and symptom onset.Footnote 73 Given these challenges, the scheme establishes specific eligibility criteria to ensure that compensation reaches those who cannot access it through the traditional tort system. To be eligible for a payment under this scheme, sufferers must cumulatively prove, among other requirements, that: (1) they did not bring ‘an action for damages in respect of the disease against the relevant employer’Footnote 74 or against the employer’s insurer; (2) they were unable to bring such action because the employer or insurer could not be found, no longer existed or for any other reasons;Footnote 75 and (3) they did not receive damages or a specified paymentFootnote 76 and are not eligible to receive a specified payment.Footnote 77 Lord Freud, the Parliamentary Under-Secretary of State in the Department of Work and Pensions, confirmed that it was always ‘the policy intention that this scheme must be one of last resort and that all other avenues should be exhausted first’.Footnote 78
In both situations, the tort system was unavailable to victims of certain occupational diseases because the liable party could not be found or had ceased to exist, prompting the establishment of a statutory compensation scheme to provide some form of compensation as a last resort.Footnote 79 Considering that eligibility for these two compensation schemes depends on proving the unavailability of the tort system, they are not intended to replace it. On the contrary, the eligibility rules aim to exclude applicants who have another option for redress at an early stage. It reveals that, in the eyes of the legislators, the tort system remains the primary avenue for redress, while the compensation schemes are designed to bridge the remaining compensation gaps – serving as an ultimate safety net.
(ii) There is no liable party
Individuals suffering from mesothelioma because of exposure to asbestos are eligible for a lump sum payment from another compensation scheme, regardless of their employment status. Established in Part 4 of the Child Maintenance and Other Payments Act 2008, this scheme was designed to provide swift compensation to all mesothelioma sufferers and to address the ‘gaps left by the [Pneumoconiosis etc (Workers’ Compensation)] 1979 Act’.Footnote 80 Three categories of mesothelioma sufferers were particularly disadvantaged due to their ineligibility under the Pneumoconiosis etc (Workers’ Compensation) Scheme (1979)Footnote 81 and their inability to pursue court damages: (1) those exposed to asbestos environmentally, (2) those with secondary exposure; and (3) those who were self-employed.Footnote 82 For sufferers exposed through environmental sources or self-employment, no liable party existed to sue, leaving them unable to seek recourse under the tort system. For mesothelioma cases involving secondary exposure (eg through a spouse’s employer), a liable party may have existed, but proving negligence and causation was more challenging due to the victim’s indirect exposure to asbestos.Footnote 83 Although the 2008 scheme is open to all mesothelioma sufferers,Footnote 84 these three groups were its primary intended beneficiaries.Footnote 85
The Mesothelioma Scheme (2008) was engineered to address two tort-related needs. For sufferers able to pursue a tort claim, the scheme aims to provide early relief, offering faster access to compensation than the traditional tort system. This accelerated support is really important, as mesothelioma sufferers have an average life expectancy of about a year post-diagnosis.Footnote 86 For those unable to pursue a tort claim, the scheme serves as a last resort source of compensation, ensuring support for individuals who are otherwise unlikely to secure it through the tort system.
(iii) There is no real prospect of success in court
The Vaccine Damage Payment (VDP) Scheme (1979) provides a fixed lump sum payment to certain peopleFootnote 87 who have been severely damaged by vaccinations against specified diseases.Footnote 88 The goal is different to the other three statutory schemes, and the scheme is intended to offer financial relief to the small minority of people who experience adverse effects from vaccines administered as part of public health programs.Footnote 89 The establishment of the VDP Scheme was driven by several factors. These included the advocacy and publicity efforts of the Association of Parents of Vaccine Damaged Children, led by Rosemary Fox, with support from MPs;Footnote 90 ongoing legal actions against the then Department of Health and Social Security (DHSS) and local authorities, which prompted the DHSS to offer ex gratia payments to settle claims;Footnote 91 and finally, the Pearson Commission’s recognition of the significant challenges vaccination victims face in seeking redress through the tort system, which led to their recommendation that the Government or relevant local authority should bear strict liability in tort for harm caused by recommended vaccinations.Footnote 92 Although barriers in the tort system were one contributing factor, the scheme’s introduction was primarily driven by advocacy and political pressure. Nonetheless, subsequent developments in tort law have made the scheme essential for affected individuals.
In the context of vaccine-related injury, successfully claiming damages is extremely challenging, if not impossible. Claimants may attempt a negligence action against public authorities that recommended the use of the vaccine in the public interest, but establishing a duty of care, breach of duty and causation is highly difficult. These challenges were an important reason for the Pearson Commission’s recommendation to develop strict liability in these circumstances.Footnote 93 Alternatively, claimants might sue the manufacturer, but this requires proving either the manufacturer’s negligence or that the vaccine was defective, which is no small feat. A claim could also be made in negligence against the doctor who administered the vaccine, but unless the doctor adopted a practice unsupported by a responsible body of professional opinion,Footnote 94 the claim is likely to fail. Yet, across all these situations, the primary obstacle remains proving causation.Footnote 95 As Pywell noted, the judicial route ‘has never led to a successful claim in England or Wales, principally because of the outcome in Loveday v Renton’.Footnote 96 This case, related to the pertussis vaccine, collapsed on the preliminary issue of general causation when Stuart-Smith LJ declared that the causal link between the administration of pertussis vaccine and the occurrence of brain damage in young children had not been proved on the balance of probabilities.Footnote 97 In addition to these obstacles, remedies for damages are sometimes further restricted in emergency situations. During crises like Covid-19, the Human Medicine Regulations 2012 can activate regulation 345, which protects manufacturers, healthcare professionals, and others from civil liability,Footnote 98 except for claims under the Consumer Protection Act 1987 (defective products).Footnote 99 For all these reasons, claimants injured by vaccines have no real prospect of success in English and Welsh courts. As Tindley noted in 2008, ‘to date, no UK litigant has received tort damages for vaccine-injury’,Footnote 100 a statement that remains accurate.
While causation is still an important obstacle for applicants to the VDP Scheme, this scheme remains the ‘only proven route to redress for people damaged by vaccine’.Footnote 101 Although this scheme was not solely introduced to address the limitations of the tort system, it has become the only, albeit challenging,Footnote 102 means of obtaining redress in practice.
4. The effects of compensation schemes on entitlements in tort law
The previous section highlighted the important influence of the tort system in the creation of compensation schemes. Whether statutory or non-statutory, compensation schemes are introduced in reaction to the existing tort system. The primary difference between the two types lies in their underlying purpose: non-statutory schemes are generally created by defendants to divert compensation claims away from the tort system, while statutory schemes are often legislative responses designed to address the inability of certain victim groups to obtain compensation through the traditional tort route (ie the ‘unavailability’ of the tort option). This distinction is important because, as this section will demonstrate, the motivations behind the creation of compensation schemes largely influence some of their operational rules. This section argues that these two primary motivations help explain how receiving payment from a scheme impacts subsequent access to the tort system and how any potential overlapping compensation sources are managed.
(a) Subsequent actions in tort for the same medical conditions
The distinction between non-statutory and statutory compensation schemes, as previously outlined, further leads to clear differences in how these schemes operate. For instance, while receiving a payment under a non-statutory scheme often excludes a civil compensation claim for the same injury, receiving payment under a statutory scheme does not.
(i) Subsequent actions in tort prohibited
The settlement or private agreement governing non-statutory compensation schemes often includes a prohibitive rule that precludes beneficiaries who receive a payment from the scheme from pursuing a tort action for the same medical conditions. Considering that these schemes are designed to redirect compensation claims away from the tort system, such a rule is unsurprising and serves as the quickest way to ensure the schemes achieve their intended purpose.
For instance, in the case of infected blood, the Macfarlane (Special Payments) (No 2) Trust was established to benefit HIV-infected haemophiliacs in an agreement aimed at settling the HIV Haemophiliacs Litigation. The settlement clearly specified that, with a few exceptions, beneficiaries could only receive payments from the Trust by ‘signing an undertaking not to bring proceedings against any Defendant or … Government body’.Footnote 103 A similar rule applied to the Coal Workers’ Pneumoconiosis Compensation Scheme (1974), as confirmed by the then Minister of State from the Department of Employment,Footnote 104 and can also be found within the agreements for the COPDFootnote 105 and VWFFootnote 106 Schemes.
(ii) Subsequent actions in tort allowed
When considering statutory compensation schemes, the possibility of a beneficiary pursuing a subsequent tort claim can seem paradoxical because these schemes are designed to address the inability to obtain compensation through the traditional judicial route. As noted, claims under the Pneumoconiosis Scheme (1979) or the Diffuse Mesothelioma Payment Scheme (2014) are only possible when the employer, or their insurer, no longer exists or cannot be found. But what happens if the employer or insurer is located after the claimant has already received compensation from the scheme? While such cases are rare, they can still occur. As for the Mesothelioma Scheme (2008) and the VDP Scheme (1979), beneficiaries are not required to prove the unavailability of the tort route to qualify, and they can technically receive payments regardless of whether another route for redress exists. Accordingly, the question of whether a tort action is permissible after receiving payment under these schemes remains relevant across all four statutory compensation schemes.
The limitation identified in non-statutory compensation schemes does not apply to statutory schemes: qualifying claimants who receive compensation from any of the four statutory schemes can still pursue damages, even for the same medical conditions. For the three dust-related schemes (1979, 2008 and 2014 schemes),Footnote 107 this is implied by provisions aimed at preventing the claimants’ double recovery. Under the VDP Scheme, section 6(4) of the Vaccine Damage Payments Act 1979 explicitly allows beneficiaries to claim damages at common law, both generally and in respect of the same injury specifically.
This shared characteristic supports the view that, unlike non-statutory compensation schemes, statutory schemes are created to supplement the tort system. Given this fundamental difference, non-statutory schemes like the vCJD Trust – created to provide victims of BSE/vCJD with an alternative to the tort system, as discussed in the previous section – stand out as anomalies. Unlike other non-statutory schemes, the vCJD Trust explicitly allows beneficiaries or their families to pursue ‘legal proceedings against the Crown and/or related bodies if so advised’.Footnote 108 This provision suggests that beneficiaries can claim compensation for the same conditions through both the scheme and legal action, a rule seemingly at odds with the scheme’s main motivation. However, as the next section will demonstrate, there is more than one way to achieve the same outcome. It will show that the vCJD Trust, despite preserving beneficiaries’ right to sue, is also designed to circumvent the tort system.
(b) Subsequent compensation awarded via the tort system
The question of whether – and to what extent – a beneficiary can obtain damages in addition to a compensation scheme payment is closely tied to the possibility of pursuing a subsequent tort action. If a beneficiary is entirely barred from initiating legal proceedings after receiving a scheme payment, the issue of additional compensation does not arise. However, if no such bar exists, there is a genuine possibility of obtaining a civil award alongside the scheme payment.
The issue of subsequent compensation is particularly problematic when beneficiaries of a compensation scheme are permitted to claim damages for medical conditions already covered by the scheme. This is the case for statutory compensation schemes as well as the vCJD Trust, a non-statutory compensation scheme. In such situations, as illustrated in Ballantine v Newalls Insulation Company Ltd,Footnote 109 both the civil award and the scheme payment compensate the same medical conditions. These two sources of compensation directly overlap, creating a real risk of double compensation. To mitigate this risk, the overlap is managed through systems of recoupment or reduction. Under recoupment, ‘the damages … may, or may not, be reduced by the amount of benefit received from the other sources’,Footnote 110 but ‘the providers of … collateral payments are allowed to seek reimbursement from the tortfeasor’.Footnote 111 This system applies to the three dust-related statutory compensation schemes (1979, 2008 and 2014 schemes). In contrast, under reduction, ‘the damages are reduced by the amount of benefit received, but the collateral source is given no right to seek reimbursement’.Footnote 112 The VDP Scheme and the vCJD Trust use this system.
The following section argues that the recoupment system favoured by most statutory compensation schemes aligns fully with their main objective: to supplement rather than supplant the tort system. It also demonstrates that the reduction system applied to the vCJD Trust, a non-statutory compensation scheme, is also coherent with its overarching goal of bypassing the tort system. Finally, the section contends that the reduction system used in the VDP Scheme, a statutory scheme, is fundamentally at odds with its objectives and produces an undesirable outcome from a corrective justice perspective. The section concludes by advocating for reform of the VDP Scheme.
(i) Statutory compensation schemes and the system of recoupment
The system of recoupment, initially created for the recovery of social security benefits from tort damages, was progressively extended to lump sum payments made under the 1979,Footnote 113 2008Footnote 114 and 2014Footnote 115 dust-related statutory compensation schemes. Under this system, the tortfeasor is liable to reimburse the provider of a scheme payment – which, for the three statutory schemes, is the Secretary of State. Two potential scenarios arise, depending on the level of damages awarded. If the damages awarded to the beneficiaries are equal to or higher than the lump sum payment, the tortfeasor is liable to pay the Secretary of State an amount equal to the total recoverable lump sum. As a result, the claimant’s civil award is reduced accordingly.Footnote 116 In this first situation, the Secretary of State recoups the full lump sum payment, while the claimant obtains whatever remains, if anything, of the civil award. Alternatively, if the damages awarded are less than the lump sum payment, the tortfeasor is liable to pay the Secretary of State an amount equal to the total damages. In this second situation, the Secretary of State recoups only part of the lump sum payment, and the victim receives nothing further.Footnote 117 This recoupment system in England and Wales seemingly appears to offer an appealing outcome: the tortfeasor ultimately ‘pays’ for the damage, the statutory scheme is (at least partly) reimbursed, and beneficiaries are not compensated twice for the same injury. At worst, they recover nothing; at best, they receive a ‘top up’, ie the difference between the total damages awarded and the lump sum payment.
The difficulty with this recoupment system is that compensation schemes do not have a direct action against the tortfeasor, meaning they rely entirely on beneficiaries to initiate legal proceedings to recover the lump sum payment from a civil award. This was not the only possible solution; other legal systems, such as the French, opted to allow compensation schemes to sue the tortfeasor directly.Footnote 118 The English and Welsh legal system, however, chose differently, and there are legitimate reasons for favouring this approach. One such reason is that it allows compensation schemes to focus solely on their ‘compensation mission’, rather than diverting funds and attention to the often expensive, uncertain and lengthy process of recovering lump sum payments.Footnote 119
Regardless of alternative solutions, the recoupment system implemented for statutory compensation schemes appears to align with the objective of these schemes, at least when beneficiaries are incentivised to take legal action against the tortfeasor. If, as previously suggested, the objective of statutory compensation schemes is to supplement the tort system, then presumably beneficiaries should be encouraged to pursue the tort route, should it become available. This would not only encourage beneficiaries to initiate legal proceedings against the party truly responsible for their damage, but also allow statutory compensation schemes to recover the lump sum payment from the tortfeasor through the recoupment system. The incentive for beneficiaries to take legal action against the tortfeasor depends on two factors: (1) their chances of success; and (2) the level of damages awarded.
Claimants with little chance of success are unlikely to pursue an action in tort. In dust-related cases, such as those covered by the 1979, 2008 and 2014 statutory compensation schemes, the courts have taken a more relaxed approach to tort claims, particularly where issues of causation are concerned.Footnote 120 This approach undoubtedly increases claimants’ prospects in court. Equally, for beneficiaries to have an incentive to initiate legal proceedings against the tortfeasor, the lump sum payment must be lower than the civil award, as this is the only configuration in which beneficiaries can potentially receive a ‘top up’. Beneficiaries of the Pneumoconiosis Scheme (1979)Footnote 121 and the Mesothelioma Scheme (2008) appear to have such an incentive, as the payment tariffs were intentionally set lower than the damages awarded.Footnote 122 The Diffuse Mesothelioma Payment Scheme (2014), however, is quite different. Due to the low number of applicants,Footnote 123 the payment tariffs, initially set at 80% of the average damages,Footnote 124 was altered to provide 100% of the average civil award. While beneficiaries initially had a clear incentive to pursue the tort route,Footnote 125 it is unlikely they still do. In fact, for this specific scheme, the increase in the tariff (to 100%) aligns with the idea that the scheme has become the only remaining route for redress.
Beneficiaries of the 2014 scheme have no difficulty proving their employer’s liability, as eligibility for the scheme requires demonstrating the employer’s negligence or breach of statutory duty.Footnote 126 Additionally, in mesothelioma cases, judges adopt a flexible approach to causation, using the claimant-friendly Fairchild test rather than the traditional ‘but for’ test.Footnote 127 When employees cannot establish, through the ‘but for’ test, that their mesothelioma resulted from tortious exposure to asbestos by a specific employer, they can still meet the causation requirement by demonstrating that the exposure materially increased their risk of contracting the disease. This exceptional causation rule is particularly advantageous for claimants with asbestos-related mesothelioma, as it leads to liability for the entire damage (one tortious employer) or joint and several liability (multiple tortious employers) under section 3 of the Compensation Act 2006.Footnote 128 Thus, beneficiaries of this scheme have strong prospects in court.Footnote 129 However, they often cannot secure a civil award because, due to the long latency of mesothelioma, by the time the disease manifests, the employer has usually disappeared, and the employer’s insurer cannot be traced. As explained before, the scheme was set up because there was no one left to sue.Footnote 130 Had there been anyone left to hold accountable, it is highly likely that a tort action would have been successful.
(ii) Non-statutory compensation schemes and the system of reduction
Beneficiaries of the vCJD Trust, a non-statutory compensation scheme, can claim a civil award for the same injury that resulted in the scheme payment, potentially leading to an overlap in sources of compensation. Unlike the three dust-related statutory schemes mentioned above,Footnote 131 the vCJD Trust does not have a specific provision for recoupment of payments. Accordingly, any overlap is likely to be handled through a system of reduction.Footnote 132
In broad terms, the system of reduction operates similarly to recoupment, with one noticeable difference: the collateral source (ie the provider of the scheme payment) does not recoup the payment. Unlike recoupment, the reduction system appears quite favourable to defendants because they ‘pay less money to the claimants’,Footnote 133 and ‘have no duty to refund the payments from the collateral sources’.Footnote 134 As such, compensation to beneficiaries is partly borne by the compensation scheme (and taxpayers) rather than the tortfeasors. Yet, there are valid reasons for privileging reduction over recoupment, especially in situations involving non-statutory compensation schemes. Since these schemes are designed to bypass the tort system and are set up and funded by defendants, the defendant and the provider of the scheme payment are the same. As illustrated by the vCJD Trust, the Government acts as both the defendant and the scheme’s funder. Implementing a recoupment system for these ex gratia payments would be a wasteful process, given the time and administrative costs involved. For non-statutory compensation schemes, the reduction system is the more efficient option.
Claimants face the same dilemma under the system of reduction as they do under recoupment: whether to bring a civil claim following the receipt of a scheme payment. Likewise, the decision depends on the existence of an incentive to initiate legal proceedings, which is determined by: (1) the chance of success; and (2) the amount of damages awarded. In respect of the vCJD Trust, eligible beneficiaries have no incentive whatsoever to bring a civil claim. Not only is the compensation level under the scheme ‘at (or near) 100% of what might be awarded at common law’,Footnote 135 but in addition some beneficiaries may actually be in a better position under the scheme than they would be under the common law. For example, qualifying carers claiming compensation for their psychiatric injury may succeed under the scheme,Footnote 136 where they would fail in court.Footnote 137 Accordingly, even though eligible recipients under the vCJD Trust could initiate legal proceedings against the tortfeasor, they have little reason to do so. These findings are also borne out in practice, with only one reported case involving beneficiaries of the vCJD Trust. Even that case demonstrates a clear lack of interest in bringing tort claims, as the beneficiaries sought a revision of the scheme rules rather than damages.Footnote 138 This lack of incentive is intentional, as confirmed in the briefing note to the Secretary of State:
There is no requirement under the Scheme to compromise a civil claim but any person who receives sums has to give credit for those in any subsequent litigation brought against the Department. It is in the Department’s interest that any sums paid out approximate to any sums which might be recovered in civil litigation as far as possible in order to reduce the incentive to bring litigation.Footnote 139
The conclusion, therefore, is that, like many other non-statutory compensation schemes,Footnote 140 the vCJD Trust was established to divert compensation claims away from the courts – likely to avoid the costs of litigation and minimise public attention on the ‘BSE scandal’.
(iii) The VDP Scheme and the system of reduction: time for a reform
The VDP Scheme is a statutory compensation scheme. Beneficiaries who successfully apply and receive the £120,000Footnote 141 lump-sum payment may also claim damages at common law for the same vaccine injury, potentially leading to an overlap between the sources of compensation. This has not occurred so far and is unlikely to in the future, as recipients of the VDP Scheme have no incentive to bring a civil claim, even though a civil award is likely to exceedFootnote 142 the £120,000 statutory payment. Claiming under the scheme is challenging and rarely successful.Footnote 143 Yet, obtaining compensation through the tort route is even more difficult, making the chances of success extremely low.Footnote 144
Nevertheless, it is impossible to say that a vaccine-injured claimant will never succeed at common law. In cases of overlap between the statutory payment and the civil award, ‘the court shall treat a payment [under the VDP Scheme] as paid on account of any damages which the court awards in respect of such disablement’.Footnote 145 Considering that there is no provision for recouping the statutory payment, the only option remaining is the system of reduction. This is highly problematic where statutory compensation schemes are concerned. Unlike non-statutory compensation schemes, statutory compensation schemes are not designed to circumvent the tort system and, as such, are not created by defendants to tort law actions.Footnote 146 For this reason, the provider of a payment under these schemes is not the defendant in liability claims. In the case of the VDP Scheme, for instance, the provider of the payment is the Secretary of State,Footnote 147 while the defendant in tort law actions is often the vaccine producerFootnote 148 or the doctor who administered it. Claimants who are vaccine-injured rarely initiate legal actions against public authorities that recommended the vaccine in the interest of the community. In these circumstances, favouring the system of reduction over recoupment leads to an unsatisfactory outcome in terms of corrective justice: defendants pay less money to claimants without having to reimburse the compensation scheme. Considering that statutory schemes like the VDP Scheme are oftenFootnote 149 publicly funded, this effectively means that taxpayers are (at least partly) footing the bill, even when the defendant is held liable for the damage. This is a clear flaw in the design of the VDP Scheme that should be addressed in the future. More specifically, recoupment should be implemented for the VDP Scheme, in line with other statutory schemes.
5. Conclusion: what can we learn?
Recent calls for new compensation schemes in public health reflect a growing interest in using these mechanisms to provide compensation to specific victim groups. Yet, the development of such schemes has remained under-analysed in England and Wales, despite their long-standing existence in the legal system. This paper challenges the perception that these schemes have developed chaotically and with little discernible logic behind them, arguing instead that in the field of occupational and public health, they often follow an identifiable, albeit covert, pattern defined by their relationship with the tort system. Specifically, two distinct logics behind the creation and operation of these schemes were identified, forming the basis of a categorisation that proves valuable for several reasons.
First, it differentiates between Government-led compensation schemes rooted in social solidarity and those that are not, thus challenging common assumptions about the rationale behind such schemes. Despite the Government’s frequent claims to the contrary, non-statutory compensation schemes cannot be justified on the grounds of social solidarity because they are primarily motivated by a desire to avoid litigation. In contrast, only statutory compensation schemes can credibly claim a connection to social solidarity, as they are specifically designed to complement the tort system in situations where it is unavailable to some extent.
Secondly, the categorisation cements our understanding of the place and limits of the tort system in England and Wales. As surprising as it may seem, the growing importance of compensation schemes highlights the central place that the tort system continues to occupy in this legal system. Whether these schemes are created to divert liability claims away from the tort system or to address its unavailability, they are, in any case, established in reaction to the tort system. The centrality of the tort system may be more obvious in the case of non-statutory compensation schemes, which are designed to supplant it. However, it is in relation to statutory compensation schemes that the true importance of the tort system is most clearly revealed. The way these schemes operate – such as the existence of eligibility rules designed to root out applicants with a potential tort claim, and the fact that beneficiaries always retain the right to bring legal claims – demonstrates that the tort system remains the primary route for redress, with statutory compensation schemes serving as a subsidiary option.
Thirdly, the categorisation can facilitate the detection of possible outliers and highlight areas for reform. For example, while the vCJD Trust initially appears to deviate from the identified pattern, it ultimately mirrors the outcome of other non-statutory schemes by discouraging beneficiaries from pursuing tort claims through different means. As such, this scheme can be classified as a ‘false outlier’. Conversely, other compensation schemes, such as the VDP Scheme, only appear to conform to the identified pattern. While this scheme seems to share characteristics with other statutory compensation schemes, it deviates in one notable respect: it uses a system of reduction instead of recoupment, allowing tortfeasors to pay less compensation without reimbursing the scheme. This shifts part of the burden to the taxpayers, which this paper argues is unjustifiable. As such, the VDP Scheme can be classified as a ‘true outlier’ which suggests the need for reform to introduce recoupment and align it with other statutory schemes.
Finally, the categorisation could help uncover unarticulated guiding rules for compensation schemes in England and Wales. Based on the foregoing analysis, what can be observed is this: whether statutory or non-statutory, the compensation schemes presently studied all implement a system that prevents beneficiaries from double recovery, ie the possibility to cumulate both the scheme payment and the civil award for the same injury or heads of damage. The mechanisms adopted to achieve this outcome are diverse, ranging from rules that exclude alternative claims in tort law for the same injury to rules that allow for the deduction of the scheme payment from civil awards (whether through recoupment or reduction). Could this suggest the applicability, in principle, of the rule against double recovery in the context of compensation schemes, particularly in terms of how they interact with tort damages? Only further research could confirm whether this can truly be regarded as a guiding rule for the development of compensation schemes.
These insights into the development of compensation schemes in England and Wales are an important step toward a clearer understanding of their underlying principles and their evolving relationship with the tort system. However, the work presented here is merely a foundation. To fully comprehend the complexities of these schemes and their role within the broader compensation landscape, further research is needed. Future investigations must delve deeper into the intricate interplay between compensation schemes and other sources of compensation, such as social security. Only through such comprehensive analysis can we ensure that these important mechanisms function effectively within the broader compensation landscape.
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