4 November 2011 - Court of Protection hears test case on when a personal injury trust can be used in place of a deputy

Her Honour Judge Marshall QC has handed down judgment in an important Court of Protection test case as to the circumstances in which it is appropriate for the court to authorise the creation of a personal injury trust for a person lacking capacity instead of appointing a property and affairs deputy.

The matter came before HHJ Marshall QC as an application for reconsideration of a previous order made by District Judge Ashton sitting in the Court of Protection. The case concerned HM, a 7-year-old child who suffered from cerebral palsy as a result of injuries sustained at her birth. Proceedings were brought against an NHS Trust for damages, pursuant to which HM received a large lump sum and periodical payments under a compromise. However, owing to the poor merits of the personal injury proceedings, HM had settled for a sum which fell short of her actual financial needs.

SM, HM's mother, applied to the Court of Protection for authority to set up a personal injury trust, partly on the grounds that to do so would be cheaper than appointing a deputy to manage HM's property and affairs.

District Judge Ashton refused the application on the grounds (1) that setting up such a trust would bypass the safeguards of the procedures of the Court of Protection and the oversight by the Public Guardian, (2) that there would not necessarily be a significant reduction in costs, (3) that any future intervention would potentially involve the Chancery Division as well as the Court of Protection and hence be more protracted and expensive and (4) the principal benefit of a personal injury trust, namely ring-fencing from means testing for benefits would be available if the fund was retained in the Court of Protection. SM sought reconsideration of this decision under rule 89 of the Court of Protection Rules 2007. The reconsideration application was referred to HHJ Marshall QC.

HHJ Marshall QC has now given judgment overturning District Judge Ashton's original order. The judgment gives a great deal of guidance in relation to when it will be appropriate for the court to order a personal injury trust instead of appointing a deputy. The guidance included the following points:

The overriding principle, of course, is that the decision must be taken in the patient's ('P's') best interests;
The appointment of a deputy should be the norm and the authorisation of a settlement should be justified as a departure from this on the basis of a clear and significant advantage to P in doing so. The burden was on the person making the application for such a settlement to show this advantage;
In some circumstances, the appointment of a deputy may have its limitations compared to the creation of a settlement - eg where a settlement is needed to prevent the rules of distribution on an intestacy applying where one of P's parents has abandoned P;
Either deputyship or a settlement should be sought but not both - the deputy or the trustees should have control over the totality of P's affairs.
The Court of Protection can retain some supervision over a trust by means of the inclusion of a power to remove the trustee in the trust instrument. However, the automatic supervision provided under the deputyship regime by the Public Guardian was a reason to prefer the appointment of a deputy. The strongly entrenched financial protection for P given by security bonds which must be taken out by deputies was valuable.
The Judge agreed with the District Judge there was no reason to believe that funds held by the court under a deputyship would be brought into account for the purposes of calculating means-tested benefits.
Better oversight was likely to be available of a deputy's costs as compared with those of a trustee. A deputy either had to take fixed costs or have his costs assessed.

Having identified those considerations and others, the Judge went on to consider HM's specific case. The court authorised the creation of a personal injury trust. It was proposed that SM would be a trustee with a solicitor. SM was a suitable party to be a competent and effective lay trustee. The fact that SM viewed a settlement as being in HM's best interests bore some but not great weight. However, the main reason for ordering a settlement was that there was some likelihood of a settlement producing a £1,000- £2,000 p.a. saving. It was relevant that HM's finances would be tight given that the personal injury case against the NHS trust had been settled for less than her financial needs.

David Rees appeared for the Official Solicitor, who acted as litigation friend for HM.

You can download a copy of the judgment by clicking on the link below.

Judgment >>