Factual and Procedural Background
This opinion arises from a settlement in the Queen's Bench Division (QB Proceedings) in which the Plaintiff was awarded substantial damages for personal injury, approximately £1.5 million. The Court of Protection (COP) application followed to determine whether the damages should be paid to and administered by the Plaintiff's property and affairs deputy or held on trust. The Plaintiff was found to lack litigation capacity, and there was a dispute regarding his capacity to manage financial affairs with support. The case settled before these capacity issues were determined but remained relevant to the COP's jurisdiction and the management of the damages award.
The Plaintiff had executed a revocable personal injury settlement in January 2015 for interim payments and benefit preservation, and a deputy was appointed by the COP in June 2015 on the basis that the Plaintiff lacked capacity to make decisions about property and affairs. Evidence from medical and lay witnesses detailed the Plaintiff's mental condition, vulnerability, and difficulties in managing his affairs, including a tendency to mistrust professionals and make fixed, sometimes irrational decisions, particularly concerning property development ambitions.
The COP hearing involved examination of the risks associated with managing the damages award, including the "Breakdown Risks" (conflicts arising from the Plaintiff's wishes conflicting with deputies or trustees) and the "Vulnerability Risk" (risk of the Plaintiff making poor decisions under influence if left in control of capital). The court considered whether the award should be administered by a deputy or held on an irrevocable trust that balances autonomy over income with protection of capital.
Legal Issues Presented
- Whether the damages awarded for personal injury should be paid to and administered by the Plaintiff's property and affairs deputy or held on trust.
- What evidence and arguments should be considered concerning the management and administration of personal injury damages, particularly regarding the Plaintiff's capacity.
- The appropriate approach for the Court of Protection in deciding between deputyship and trust arrangements, with particular regard to the interpretation and application of the decision in SM v HM [2012] COPLR 187.
- How to balance the Plaintiff's autonomy and participation with the need to protect him from risks arising from his vulnerability and capacity limitations.
Arguments of the Parties
Appellant's Arguments
- The Plaintiff's litigation friend and deputy argued in favour of the damages award being paid to the existing deputy rather than creating an irrevocable trust.
- They maintained a strong presumption that the appointment of a deputy was the appropriate management structure under the Mental Capacity Act (MCA) 2005.
- Concerns were expressed that removing the deputy and creating a trust could undermine the Plaintiff's progress and well-being.
- They did not support the creation of an irrevocable trust and argued the existing arrangements were in the Plaintiff's best interests.
Respondent's Arguments
- The court raised the possibility of an irrevocable trust that would give the Plaintiff autonomy over income but restrict control over capital to protect against the Breakdown and Vulnerability Risks.
- The Official Solicitor, representing the public interest, advanced general legal principles from SM v HM but did not provide submissions on how those principles applied specifically to this case.
- Evidence was presented regarding the comparative costs and management regimes of deputyship versus trusts, highlighting that costs and statutory frameworks differ and should be carefully considered.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| SM v HM [2012] COPLR 187 |
Approach to appointing deputies versus creating trusts in managing property and affairs of persons lacking capacity. |
The court held that the decision in SM v HM had been incorrectly interpreted and applied in the QB and COP proceedings. It rejected the notion of a strong presumption in favour of deputyship that must only rarely be displaced by trust arrangements. |
| Director of Social Care Newcastle v V [2016] 2 WLR 1327; [2016] EWCOP 27 (Re PJV) |
Examples of trusts created for different reasons in personal injury cases. |
Used as a comparative reference to illustrate trust structures that balance autonomy and protection. |
| Allen v Distillers Co (Biochemicals) Ltd [1974] QB 384 |
Court's jurisdiction to approve settlements on behalf of protected parties. |
Referenced to highlight issues around settlement approval and trust creation for claimants lacking capacity. |
| DL v A Local Authority and Others [2012] EWCA Civ 253 |
Inherent jurisdiction of courts over vulnerable adults in a facilitative manner. |
Noted as raising issues relevant to authorizing settlements and trust creation outside COP jurisdiction. |
| Sugar v BBC and Another [2012] UKSC 4; [2012] 1 WLR 439 |
Presumptions and biases in legal reasoning (in the context of Freedom of Information Act). |
Used analogically to reject the existence of a presumption in favour of deputyship under the MCA. |
Court's Reasoning and Analysis
The court began by affirming its jurisdiction under the MCA 2005 based on the Plaintiff's lack of capacity to manage substantial capital sums. The court carefully analyzed the evidence, including medical and lay reports, which demonstrated the Plaintiff's limited capacity and significant vulnerability to influence and poor decision-making.
The court identified two principal risks: the Breakdown Risks, where the Plaintiff's wishes might cause conflict with deputies or trustees, and the Vulnerability Risk, where the Plaintiff might make disastrous financial decisions if left in control.
The court considered the legal framework governing deputyship and trusts. It noted that both deputyship and bare personal injury trusts allow the Plaintiff, upon regaining capacity, to demand control over capital, thus offering limited protection against poor decisions once capacity is regained.
The court proposed an irrevocable trust with powers of appointment to balance autonomy over income with protection of capital, allowing flexibility if the Plaintiff regains capacity. This structure would mitigate the identified risks better than deputyship or bare trusts.
Importantly, the court rejected the prevailing interpretation of SM v HM that there is a strong presumption in favour of appointing a deputy. Instead, it emphasized that the MCA requires a fact-sensitive, best interests approach without presumptive starting points that must be displaced. The decision must weigh all relevant factors in each case.
The court also noted procedural concerns, including that the initial deputy appointment was made by an authorized officer rather than a judge, which was troubling given the complex capacity issues involved. It recommended that complex cases be decided by judges to avoid similar issues.
Cost considerations were discussed, with evidence suggesting deputyship generally costs more than a bare personal injury trust, but the court noted that no detailed, reasoned cost comparison was presented for the proposed irrevocable trust. It emphasized that costs and terms must be particularized in future cases.
After hearing oral evidence, the court concluded that although an irrevocable trust might have been preferable earlier, the progress made under the deputyship and the risk of undermining that progress meant that the trust option was no longer viable in this case.
Holding and Implications
The court held that the damages award should continue to be administered by the Plaintiff's appointed deputy rather than being placed in an irrevocable trust. The application to create an irrevocable trust was not granted.
The court's decision was based on a detailed, fact-sensitive assessment of the Plaintiff's capacity, vulnerability, and best interests, rejecting any presumption that deputyship is the default or preferred arrangement under the MCA 2005. This underscores the requirement for individualized decisions rather than reliance on presumptions.
The ruling clarifies that the COP must balance competing factors in each case and that the existence of risks such as the Breakdown and Vulnerability Risks must be carefully considered. The decision also highlights the importance of proper judicial oversight in complex capacity cases and the need for clear, reasoned comparisons of management options, including costs and terms.
No new binding precedent was established, but the judgment offers guidance on the application of the MCA to personal injury damages management and the interpretation of SM v HM.