Personal injury trusts: claimants with capacity will not be awarded damages for costs

Published on
5 min read

High Court reaffirms that a claimant with capacity will not be awarded damages for the cost of setting up a personal injury trust.

Factual and procedural history

Celine Martin v Salford Royal NHS Foundation Trust [2022] was a personal injury claim brought against the defendant in the tort of negligence. The claimant had a complex psychiatric history which pre-dated the defendant’s negligence. However, as a result of the defendant’s negligence, the claimant became reliant on others for all aspects of her daily life. She uses an electric wheelchair and requires carers. She also suffered a brain injury which resulted in a severe neurological impairment. 

There were two prior judgments for this claim which dealt with liability in 2018 and quantum in 2021. The claimant was awarded damages for her care for the entirety of her expected lifetime, however, the claimant was vulnerable and there were questions around her ability to manage the money awarded. Despite that vulnerability, the Judge found the claimant did in fact have capacity.

The hearing discussed in this article was before judge Bird, followed the assessment of damages and was to determine:

  1. How the damages should be paid, by lump sum or periodical payments. If it was to be a periodical payments order, whether that order should be variable; and
  2. If the claimant should be awarded damages to set up and run a personal injury trust.

How damages should be paid

On the method of payment, judge Bird was guided by the relevant legislation and in particular Section 2(1) of the Damages Act 1996. This allows the court to make an order under which the damages are wholly or partly to take the form of periodical payments, provided [our underlining] the parties consent. CPR 41.7 requires the court to consider all the circumstances of the case in making this decision and to consider the preference of the parties.  

The claimant had some level of insight into her vulnerability and received financial advice on her claim. This recommended a request periodical payments. This was because receiving the damages in a lump sum would mean the funds would have to be invested, and it was thought that any risk of underperformance should not be borne by the claimant. The claimant ultimately agreed with this recommendation.

The judge ordered that the claimant’s damages for future pecuniary loss should take the form of periodical payments.

The court then considered if this order would be variable. This would allow the defendant to apply (only once) for the order to be varied if the claimant’s condition significantly changed in the future. In this case, it was likely the claimant would suffer significant deterioration as a result of the defendant’s negligence.

The defendant argued it was likely the claimant would in the future need to move to an institutional care environment. This would reduce the overall cost of the claimant’s care. The defendant argued they should have a right to vary the order should this situation arise to reduce their payments, which would ultimately be a benefit to the public purse.  

The judge agreed with the defendant and used his discretion to make a variable order.

The personal injury trust

A more interesting aspect of the judgment is perhaps the argument advanced by the claimant that she should be awarded the cost of setting up and running a personal injury trust (PIT). A PIT would provide protection and security for the funds awarded in damages. The claimant argued she was vulnerable to financial exploitation because of her mental health and that a trust would place a shield between her and the money.

A PIT is routinely awarded by the courts when a claimant lacks capacity. In this case the claimant did have capacity, but there were concerns about her ability to manage money. Both experts agreed that the claimant was at risk of “getting into the kind of interpersonal relationship in which she is vulnerable to exploitation by an intimate or dependent”.

It was submitted that the usual form of a PIT is as a bare trust which is described as: "one where property is vested in one person on trust for another, but where the trustee owes no active duties arising from his status as trustee. His sole duty is to convey the trust property as the beneficiary directs him.”

Therefore, as the claimant was found to have capacity, the trustees would have extremely limited duties over the trust. The trustees would be powerless to prevent the claimant from spending her money in any way that she chose.

The claimant also argued that the court had a positive duty to protect the vulnerable and Rabone v Pennine Healthcare [2012] was cited as the authority for this. They argued the court had a duty to protect the claimant from the risk of suicide and this duty should be discharged by requiring the defendant to pay for the PIT.

On considering the facts, judge Bird did determine that the risk of suicide was both real and immediate. However, the judge determined that the duty of protection did not arise. This was because Rabone held, that even the presence of a real and immediate risk to life is not sufficient for the operational duty to arise. Judge Bird also took into consideration the following factors:

  • That the claimant was not under direct supervision of the state, defendant, or court. She is not an in-patient, and not a protected party.
  • Although the claimant is vulnerable, she has support and takes advice from family
  • That the risk of the claimant committing suicide is, on the evidence, not a high risk.
  • That the risk of suicide had not solely been created by the defendant’s negligence.

He went further and commented that even if the question of protection arose that the duty had been discharged. Even if he was wrong about this, there were no reasonable steps the court or the defendant should be required to take to deal with the risk. The judge was not persuaded by the claimant’s evidence to award a PIT and did not think such an order would address the risk faced by the claimant in any meaningful way.

Comment  

This case reaffirms that the Court's obligation to protect does not arise when a claimant is vulnerable, but still has capacity. It was not appropriate to award a PIT in this scenario. As a result, defendants and their insurers can be comfortable that for now, until the law changes, the cost of a PIT will not be awarded where a claimant is found to have capacity.  

This article was written by Stephen King and Gabriella Traynor.

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