Court provides guidance as to the correct administration of awards of damages where a claimant lacks capacity

In the interesting judgment in the case of Watt -v- ABC [2016] EWHC 2543 (COP), the Court of Protection gave guidance as to the relevant issues to consider when dealing with cases involving claimants who may lack mental capacity to deal with an award of damages.

The decision of Mr Justice Charles arose in the context of a Court of Protection hearing to decide whether funds of circa £1.5 million received in settlement of a claim by an individual who lacked capacity should be dealt with by the appointment of a professional deputy or by the creation of a trust.

Although this case was heard after the settlement of the personal injury claim, the judge provided clarification of the previous Court of Protection decision in SM -v- HM [2011] EWCOP B30, and also guidance as to the issues that should be considered during the course of personal injury claims, where the issue of capacity to manage a damages award needs to be considered.

Charles J confirmed that, in his view, the correct interpretation of the decision in SM -v- HM is not that it is authority for the proposition that there is a strong presumption in favour of the appointment of a deputy over the creation of a trust.

He reiterated that it is important to consider all of the factors, in particular the breakdown risks (ie that the Claimant’s relationship with a deputy could break down) and vulnerability risks (ie the risk that the Claimant would be vulnerable to inappropriate outside influence).

The judge also commented that, in personal injury cases, where there is a difference between the parties as to the most appropriate manner in which any post settlement award should be managed, ‘the parties should provide a reasoned or particularised comparison between the rival options and so they need to be identified with appropriate particularity’.

He provided a helpful summary of the issues that litigating parties should address, as follows:

  • The management regime for a substantial award of damages should be considered as soon as is practicable.
  • This will involve a careful consideration of the what the Claimant (P) has and does not have the capacity to do and of his or her likely capacity and / or vulnerability in the near future. This is relevant to both jurisdictional and best interests issues.
  • It will also involve the identification of all relevant competing factors and should not proceed on the basis that there is a strong presumption that the COP [Court of Protection] would appoint a deputy and would not make an order that a trust be created of the award. Rather, it would balance the factors that favour the use of the statutory scheme relating to deputies (that often found the appointment of a deputy in P’s best interests) against the relevant competing factors in the case.
  • It will also involve the identification of the terms and effects (including taxation) and the costs of those rival possibilities.
  • Care should be taken to ensure that applications that are not straightforward are not decided by case officers in the COP but are put before judges of the COP.
  • The possibility of listing case management hearings or the final hearings of QB proceedings before a judge who is also nominated as a COP judge should be considered. However, the potential for conflict between the respective roles of the judge in the two courts (e.g. one arising from a consideration of without prejudice communication in respect of the QB proceedings concerning its settlement that is not agreed or not approved by the COP judge) and the respective jurisdictions of the two course need to be carefully considered.

This judgment provides useful guidance of the issues that need to be considered in relation to cases where there is a possibility that a claimant may lack capacity to deal with a significant award of damages. In the event that experts are being instructed to advise upon the appropriate mechanism for controlling the damages award (and the costs of the same), it serves as a useful reminder of the issues that they will need to address, alongside input from the medical experts in relation to the issue of the extent of the claimant’s lack of capacity.

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