Legal labyrinth

The recent judgment of Mr Justice Leggatt in the case of ZYN v Walsall Borough Council [2014] EWHC 1918 has clarified
the law on the treatment of capital derived from personal injury claims held in the Court of Protection in respect of social care charging
by local authorities.

While it is a judgment highly relevant to all community care lawyers, the principles relating
to statutory interpretation that were analysed
and determined by the court in the case have a relevance and importance above and beyond
this discrete area of law.

Clinical negligence

The facts of the case were straightforward. The claimant (ZYN) was a severely disabled female
and required community care services from Walsall Metropolitan Borough Council. In 2003, ZYN obtained compensation of £500,000 from a
clinical negligence claim against a hospital trust.

A crucial factor in the rationale behind ZYN accepting that sum, which represented just
20 per cent of the original personal injury claim
and was not enough to meet her expected lifetime care needs, was that under the law at that time, ZYN would not be required to contribute financially to her social care from the local authority.

ZYN lacked capacity to manage her property and financial affairs and, subsequently, the money she received from the claim. Following the settlement of the claim, the court made an order transferring the capital to the Court of Protection. Later orders of the court appointed a receiver to manage the money on ZYN’s behalf and – following the introduction of the Mental Capacity Act 2005 – the court made an order appointing a property and financial affairs deputy for ZYN to manage the capital in her best interests.

In 2008, the court made an order that the deputy could spend up to £50,000 per annum on ZYN’s behalf for her benefit without requiring prior authority from the Court of Protection.

ZYN was assessed as being eligible for community care services from Walsall Metropolitan Borough Council and received a package of domiciliary care at her home, which included day centre attendance and other services.

From April 2011, the local authority attempted to charge ZYN for the full amount of her social care, because she had capital of more than £23,250, which was the threshold for contribution under their charging policy.

ZYN brought a judicial review of the local authority’s charging decisions arguing that the capital should be exempt as it was derived for a personal injury claim, administered by the Court
of Protection and incapable of being disposed of without an order of the court.

The question for Mr Justice Leggatt sitting in the Administrative Court in April 2014 was whether ZYN’s capital from the personal injury settlement and managed by the deputy appointed by the Court of Protection should be disregarded by the local authority when assessing whether ZYN should be required to contribute to the cost of her care.

Claimant’s case

Both parties accepted that the capital derived from ZYN’s personal injury settlement was an ‘award of damages for personal injury’ under the Income Support Regulations (paragraph 44(2) (a), schedule 2). ZYN claimed that this capital should not be taken into account in the local authority’s financial assessment as it should be disregarded as was capital administered on her behalf by the Court of Protection, which ‘can only be disposed of by order or direction of the Court of Protection’ within paragraph 44(1)(a) and (b) of the regulations.

Local authority’s stance

The local authority made three substantive arguments. First, it claimed that the reference to the Court of Protection relied on by ZYN in paragraph 44 referred to the ‘old’ Court of Protection under the Mental Health Act 1983 as opposed to the ‘new’ Court of Protection that was created by the Mental Capacity Act 2005.

It therefore claimed that paragraph 44 did not apply to ZYN’s settlement as this was administered by the ‘new’ Court of Protection.

Second, it claimed that paragraph 44(1)(a) was not applicable in this case because, where capital derived from personal injury damages is managed by a deputy appointed by the Court of Protection, this should not be classed as being ‘administered by the court’ within the meaning of paragraph 44(1)(a).

Third, the local authority claimed that capital exceeding £23,250 could be disposed of by the deputy without an order of the court and, therefore, did not fall within paragraph 44(1)(b). This argument relied on the premise that the
order conferring power on the deputy to spend
up to £50,000 for ZYN per annum had effectively taken that money outside the capital amount ring-fenced in the local authority’s policy and
liable to be charged.

Mr Justice Leggatt addressed each issue in turn:

1. Did paragraph 44 of the regulations apply to the new Court of Protection?
The court concluded that the reference to the ‘Court of Protection’ in paragraph 44 did apply
to the current Court of Protection. The local authority claimed that the ‘transitional provisions’ between the old and new Court of Protection recognised a distinction between the two. It claimed that, given that there was
no provision stating that references to the old Court of Protection should be treated as referring to the new Court of Protection, the reference in paragraph 44 was to a body that
no longer existed and was therefore redundant.
The court considered that there were two potential methods of statutory interpretation. 

First, there is a ‘historical approach’ on which the legislation should only be read by reference to the context in which it was legislated. However, the judge said that the historical approach is not of general application and there is a preference for an ‘updating’ statutory interpretation. On this second method of interpretation, legislation should be construed in accordance with the need to treat it as current law. On a historical approach, paragraph 44 could not be read as referring to the new Court of Protection, but on the updating approach it could be.

Mr Justice Leggatt considered the intention of parliament when preferring the updating approach. He stated there was no reason to think parliament intended that, when the 2005 Act came into force, there would be a change
in policy in relation to social-care charging.
Within his judgment, the judge referred to a paragraph in Bennion on Statutory Interpretation that, in turn, quotes Thomas Hobbes’ Leviathan: “The legislator is not he by whose authority the laws were first made, but by whose authority they now continue to be laws.”

2. If so, did the capital managed by a deputy appointed by that court fall within paragraph 44(1)(a)?
Mr Justice Leggatt concluded that capital managed by a deputy appointed by the Court of Protection under the 2005 Act was administered by the Court of Protection within the meaning
of paragraph 44(1)(a). When a receiver was appointed in the old Court of Protection, he
was an agent of the court and accountable to the court. The local authority argued that, by contrast, under the 2005 Act, a deputy administers the property on behalf of the person lacking capacity rather than on behalf
of the Court of Protection.

Mr Justice Leggatt considered that the differences between the two regimes were
not ‘material for present purposes’. The new provisions merely made express what was already regarded as implicit: that the deputy acts on behalf of the person lacking capacity.
He further added that acting as the agent of the court is compatible with acting as the agent of the person who lacks capacity; indeed to act for the person lacking capacity is to carry out a delegated function of the court.

3. Did all of the capital of ZYN fall in paragraph 44(1)(b) so that it can only be disposed of by order or direction of the Court of Protection?
Mr Justice Leggatt concluded that the whole capital of ZYN did fall within paragraph 44(1)(b) and should therefore be exempt from
social-care charging.?The local authority argued that there was a significant part of ZYN’s capital that did not fall within paragraph 44 because of the 2008 order of the Court of Protection authorising the deputy to withdraw a sum not exceeding £50,000 a year from the funds of ZYN for her use and benefit without the need for the court’s prior consent. The local authority claimed this order, in effect, meant that the sum was not one that could only be ‘disposed of by order or direction of’ the Court of Protection within paragraph 44.

Mr Justice Leggatt considered that the logical conclusion of the local authority’s argument was that parliament would be making the right of a local authority to charge for the cost of care dependent on the amount that a deputy is permitted to withdraw to spend without the consent of the Court of Protection. It was considered that this conclusion would lead
to ‘absurdity’ and thus the only rational interpretation was to treat the whole
capital as falling within paragraph 44.

Welcome perspicuity

The court held that the local authority’s charging policy was unlawful to the extent that it took account of capital derived from ZYN’s personal injury settlement. An order was made to quash all the charging decisions and invoices received
by ZYN.

As well as providing some welcome perspicuity to the ‘legal maze’ of the law on the powers of a local authority to charge for social care services, this judgment may be of benefit to those unclear on how to interpret statute where the meaning may have been obfuscated over time.

Lawyers should be able to refer to ZYN and consider whether an updated interpretation of the legislation can be applied to uphold the original intention of parliament. As the judge intimated in the case, this approach is compatible with the public law principle of parliamentary sovereignty, with parliament as the highest law-making authority in the land.

Also, one should think about the effect of the interpretation of the legislation in each case. If there is a danger that a historical interpretation would lead to absurdity, it should be possible to argue that such an approach should be avoided.

This was not only an important judgment for disabled people across the country with settlements in need of social care from the state, but also important constitutionally to reinforce
one of the principles on which our jurisprudence
is founded. SJ

Yogi Amin, pictured, is a partner and Stephen Cardinal is a solicitor at Irwin Mitchell, who acted for the claimant