Watt v ABC
Summary
In this case Charles J was considering the issue of whether P's funds from a personal injury award of £1.5 million should be administered through a deputyship or a trust. Charles J had approved the settlement sitting as a QB judge. There was an issue as to P's capacity to manage his property and affairs and Charles J held that P lacked such capacity but that there was a small chance that P might regain capacity and the issue should be kept under review (paragraph 7).
At paragraph 8, however, Charles J stated that the given the unusual and difficult nature of the case, the deputyship order should not have been made by an authorised officer.
The evidence suggested that with support P would have capacity to make decisions about how to spend the income from his award (paragraph 11). It also suggested that in the event that P regained capacity to manage the capital element of his award, he would be very vulnerable to exploitation (paragraph 16). There was also a serious risk of a breakdown in the relations between P and his professional advisers (paragraph 15).
This lead Charles J to suggest that it would be in P's best interests for the award to be settled on irrevocable trusts which allowed P autonomy over income but would not allow P access to capital even if he regained capacity (paragraphs 17 and 18). He thus, at paragraph 65, directed the parties to produce an analysis of the rival options (including but not only their costs).
He then turned to considering SM v HM [2012] COPLR 187 (a decision of HHJ Marshall).
That case is often cited as authority for the proposition that there is a strong presumption in favour of a deputyship over a trust. Charles J held that it was not or if it was, then it was wrong (paragraph 69).
At paragraphs 76-79 he said this:
- Rather, it introduces a reasoning process that can, for example, start with all of the factors that favour the appointment of a deputy over other results and so points that deputies are appointed and regulated under a statutory scheme (a) which is directed to persons who lack capacity and so need someone to make decisions for them, and (b) which has statutory tests for decision making, access to the COP, checks and balances and provisions that provide security (and so the points made in paragraphs 32 to 34 of SM v HM and paragraph 53 hereof).
- I fully accept and acknowledge that the weight of those factors in many cases (and perhaps the great majority of cases) will outweigh factors in favour of the COP making an order that empowers persons other than a deputy (and so trustees) to make decisions about P's property and affairs, and so the appointment of a deputy can be said to be the norm.
- But I repeat that in my view the normality of the appointment of a deputy does not create a presumption, starting point or bias that needs to be displaced.
- I accept that in many circumstances only fine or pedantic differences can be said to exist between a rebuttable presumption and a starting point that recognises the existence of a normal arrangement. However, in my view, an approach based on a strong presumption that has to be displaced has been at the heart of the result in this case that factors against the appointment of a deputy, and so the Breakdown Risks and the Vulnerability Risk, were effectively ignored until it was too late to assess whether they founded the result that the weight of competing factors favoured the creation of an irrevocable trust.
"I make the following points:
(1) The management regime for a substantial award of damages should be considered as soon as is practicable.
(2) This will involve a careful consideration of 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 future. This is relevant to both jurisdictional and best interests issues.
(3) 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 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 that case.
(4) It will also involve the identification of the terms and effects (including taxation) and the costs of those rival possibilities.
(5) 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.
(6) The possibility of listing case management hearings or the final hearing 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 courts need to be carefully considered.
