When an ex gratia payment is made to an employee who then wins compensation for the same matter, the ex gratia payment is to be deducted from the compensation.
The case concerned a goods vehicle driver who had to stop work after eight years because of a bad back. Some of the problem arose from a congentinal condition. His employer gave him an ex gratia payment of £11,889.10, stating that this was non-contractual but would be regarded as an advance against any damages awarded against them.
The employee sued for negligence in the court where he was awarded £3,000. The issue then was whether the payment already made could be deducted, reducing it to zero. In the first instance, the judge decided that the ex gratia payment was an act of benevolence, payable regardless of the outcome of any subsequent court award.
The Court of Appeal considered the matter on the basis of previous cases. The court established the simple rule that benevolence could only be ignored when it arose from a third party, such as when an employee claimed on his own insurance policy or when he received a payment from a third party such as a charity or trade union. Where the payment was received from the employer, it would be against public policy to make any subsequent award additional as this would discourage employers from making such payments. The employer’s motive could only be to benefit the employee, as such a payment does not extinguish any claim for negligence.
Williams v BOC Gases Ltd. CA [2000]
[2000]