Trustee or deputyship order?

Deputyship orders should always be the starting point when deciding on the best way to manage clinical negligence damages but they are not the only way, the Court of Protection confirmed in SM v HM [2012] WTLR 281.

The case was about HM, a seven-year-old girl with cerebral palsy, and the question was whether the damages she had been awarded should be more appropriately managed via a personal injury trust.

The judge, HHJ Hazel Marshall QC, said that parliament intended that the deputyship order should be used as 'the norm' '“ a position accepted by all parties '“ but in the circumstances acceded to HM's mother to set up a trust and appoint her and a professional jointly as trustees of a personal injury settlement of HM's award.

As safe as an order

Judge Marshall acknowledged that there were circumstances where a trust might be preferred over a deputyship, provided that there was a 'significantly clear and overall advantage' offered by the former.

She cited a number of prerequisites: hurdles which simply must be overcome by the person seeking authorisation of a trust before they can even begin to argue about advantages.

An obvious one is that there absolutely has to be a family member who is suitable to act as a trustee. The judge was clearly impressed with SM in this regard, saying she was 'strong', 'articulate', 'responsible' and 'capable'. Crucially, the judge was satisfied that this mother was made of stern enough stuff to keep the professional trustee on the straight ?and narrow.

However, Judge Marshall was very cautious about vesting power in a family member who may not be the paragon that SM is. She warned about conflicts of interest, particularly where the family member is dependent on the mentally incapable person's award for their accommodation. This is not at all unusual, particularly in cerebral palsy awards to children where a large chunk of the money is often spent buying and adapting a home for the whole family.

It is not hard to see how this could raise some sticky issues in practice. It is probably not too difficult to predict which parents a court would happily appoint as trustees and which it would not. However, it will not be easy explaining this to someone who falls into the latter category.

Another prerequisite is a very tightly-drafted trust deed. Any trust has to be just as safe as the deputyship regime, she suggested. For example, professional deputies are limited in what they can charge for their services by the Court of Protection. The fees of professional trustees are not so easily controlled. In the case of HM, his hurdle was overcome by the professional trustee giving an undertaking to cap his fees. It is possible that without this undertaking, the outcome may have been different.

Very clear advantage

But the perfect trustee and the perfect trust deed are not enough: there must also be a very clear advantage. In HM's case this was cost. After a lot of expert evidence, the judge was satisfied that a trust would be £1,000 to £2,000 per year cheaper to administer than a deputyship. Due to facts peculiar to this case, this saving was enough to persuade the judge to authorise a trust.

HM's settlement was reached by a compromise with the defendant and was only about one third of her original claim. This meant that there was already a large shortfall in the money needed to pay for ?her care. Under these circumstances, a relatively small cost saving took on ?greater importance.

There are other reasons why a trust might be preferred. A key one is to prevent the rules of intestacy from applying. Emotionally this can be a compelling reason. A child who suffers a brain injury at birth as a result of clinical negligence could receive a multi-million pound award. Under the laws of intestacy, if the child were to die this would be shared equally between both parents which is perfectly proper if they both played an equal role in caring for their child. In the case of an absent father, such a result might seem unjust in the extreme.

Judge Marshall also took the trouble to explain why some long-standing arguments in favour of a trust would no longer work. One such argument was that working under a deputyship meant dealing with the Court of Protection, which was claimed to be notoriously slow and inefficient.

The judge held that this was an outdated perception and painted a picture of the new court under the 2005 Act as a slick and flexible organ of justice. Practitioners will have to decide for themselves whether they agree with this view.

She also made an extremely helpful ?point in relation to means-tested benefits and clarified that capital under the ambit of the Court of Protection was treated in the same was as money in a personal injury rust. Hence there was no advantage to be had here.

This area of law is not only fact-specific but also specific to the personalities involved but the judge in SM v HM has done her level best to give practitioners ?all the answers to a tricky question in ?a neat package.