View source for ICLR (2016) WLR(D) 682

<center>Queen’s Bench Division

OH v Craven

AKB v Willerton

[2016] EWHC 3146 (QB)</center>

Norris J

''Practice — Settlement of action — Payment into court — Sums paid into court funds office following settlement of personal injury claims — Applications for payment out to trustees of private personal injury trusts established for benefit of claimants — Whether payment out to be sanctioned — Practice to be followed by litigation firms proposing to establish personal injury trusts''

In the first case the claimant, then aged ten, was involved in a road traffic accident. A personal injury claim was brought on his behalf by his mother as litigation friend, resulting in a satisfactory settlement proposal and payment into the court funds office of just under £2m. The claimant’s lack of capacity arose only from his minority and not from lack of mental capacity. In the second case the claimant, a young adult, was involved in a cycling accident. He was treated as lacking in litigation capacity and his personal injury claim was conducted by his mother as litigation friend. The settlement sum (nearly £2.5m) was approved by the court and paid into the court funds office pending the appointment by the Court of Protection of a property and affairs deputy. In the event, the medical opinions assessed the claimant as capable of managing his affairs with support. The claimants each applied for an order directing payment out of the court funds office to the trustees of a personal injury trust established, or to be established, those trustees being connected with the solicitors who had conducted the litigation.

On the applications—

Held, (1) the law irrebuttably presumed that a solicitor had influence over his client. Vesting a large sum of money to which the settlor had recently become absolutely entitled in the settlor’s solicitor upon a bare trust for the settlor (but subject to charging and other powers vested in the solicitor) could not readily be accounted for by ordinary motives. It was a transaction that called for an explanation. It gave rise to a rebuttable evidential presumption that the solicitor’s influence had been undue. The burden lay on the solicitor to adduce evidence rebutting that presumption. Typically, that evidence would demonstrate that the settlor had had independent advice such that the constitution of the bare trust was a spontaneous act undertaken in circumstances which enabled the settlor to weigh matters up and to exercise his or her own free will (para 30).

(2) Thus, where a litigation firm proposed the establishment of a “personal injury trust” in relation to a settlement of £1m or more where an in-house trust corporation was to be a trustee, a separate partner in the firm should, at the firm’s expense, instruct chancery counsel of not less than five years’ standing to advise the claimant or the litigation friend in writing as to the advantages and disadvantages of the proposed private trust (both as to its strategic advantages and as to its exact provisions, including the advantage of trusts other than bare trusts) and as to the trusteeship arrangements. The instructions to counsel and the opinion should be put in evidence when the court’s approval of a compromise incorporating such a proposal was sought or when an application was made for a payment out of the court funds office (para 31).

(3) Application in the first case adjourned. The court could not be satisfied that the support of the claimant’s litigation friend to the proposal had resulted from an unconstrained free choice. It was necessary to establish that she had been enabled to make a free choice as to the identity of the trustee and the exact terms of the trust. Once advice had been received and the litigation friend had acted on it, the matter would be restored for directions (para 34).

(4) Application in the second case granted. It was possible to ascertain that the claimant was set upon establishing a bare trust on the declared terms and did not want the opportunity to review his decision. Accordingly, the payment out to trustees would be sanctioned (para 33).
Per curiam. As a provisional view, where the trust fund exceeds (say) £3m (so that the annual income might well be of the order of £75,000) serious thought ought to be given to including within the trust provisions the appointment of a suitably qualified family member or an independent professional as a “protector”, whose consent would be required to (a) any alteration in the original trustee remuneration rates originally approved by the court when approving the compromise or payment out, (b) the engagement of any investment advisers or managers and their remuneration and (c) the exercise of any power which would deprive the beneficiary of income or capital to which he or she would otherwise be entitled as of right (para 32).

'''Appearances:''' 
 
Gregory Poole, solicitor (of Slater and Gordon) for the claimant in the first case, by his mother and litigation friend, TA.
 
Charles Woodhouse (instructed by Irwin Mitchell) for the claimant in the second case, a protected party by his litigation friend, JB.

Reported by: Benjamin Weaver Esq, Barrister