BJB [2024] EWCOP 59 (T2)
This case concerns an application by the financial Deputy for BJB to be released from a reverse indemnity made in a damages award.
The facts:
On 07.05.09 an Order was made in the QBD of the High Court approving settlement of a damages claim. The Order included:
- Reverse indemnity undertaking whereby 98% of the sums received by BJB in state provision are to be deducted from the annual periodical payment (PPO) received, and
- Provision for release of the reverse indemnity undertaking by the Court of Protection if they are satisfied that BJB does not have sufficient resources to meet their reasonable needs.
The settlement Order also included the following provisions:
- “AND UPON the Claimant and the Defendant having agreed that no allowance has been made for possible enhanced needs after the age of 30 years (so that any increased payment made as a result of such enhanced needs shall not be repaid in full) the Claimant and the Defendant undertaking to perform their respective obligations under Schedule 2 annexed to this order” and
- A provision confirming the PPO paid comprised damages for future care and case management.
The damages settlement included a 2% reduction on liability, a lump sum of £1.4m gross and an index linked PPO of £132,000 p/a.
The damages claim related to a birth injury causing BJB severe dystonic cerebral palsy. BJB is now aged 30 years with a life expectancy in to their 70s. They are described as living “a rich and varied social life” and require 24/7 care which is funded by Direct Payments.
BJB’s financial Deputy applied for release from the reverse indemnity undertaking. The application was opposed by the Defendant hospital trust and the NHSLA.
The application included full details of BJB’s financial position including a cashflow forecast confirming the capital resources would be exhausted in 10 to 12 years leaving BJB reliant on benefits.
Case manager evidence confirmed the cost of meeting BJB’s actual care needs cost £60,000 pa more than her annual income.
Whilst the Respondents did not challenge the reasonableness of BJB’s care arrangements, they argued:
- The PPO was to meet the costs of care and case management only,
- The lump sum was to meet all other heads of loss,
- The presumption in a damages award is the lump sum will be invested so it can be drawn down over BJB’s lifetime to meet their needs,
- Expenditure identified by the Deputy had been included in the lump sum calculation.
The Respondents referred to the provision in the settlement Order concerning enhanced needs after the age of 30 years and also invited the Court to consider whether BJB’s funds had been appropriately managed. They contended that if released from the undertaking the state would effectively be paying for BJB’s care twice resulting in a double recovery.
Consideration was given as to whether the application was premature given funds would last a further 10 to 12 years. The Court accepted evidence that having reached the stage where it became necessary to draw down capital, delaying the application further would require the Deputy to make adjustments to BJB’s expenditure to ensure the capital lasted as long as possible.
Her Honour Judge Hilder was satisfied, based on the evidence before her that BJB did not have sufficient resources to meet her needs should the reverse indemnity stand. The parties were invited to agree the terms of an Order to give effect to these findings.
Does this decision effectively signify the end to settlement awards including a reverse indemnity where P’s funds are no longer sufficient to meet their expenditure needs for life?
Definitely not.
One of the defining factors in this case was that of the jurisdiction of the Court of Protection to make an Order.
Her Honour Judge Hilder identified that the settlement Order imposed “a sort of obligation on the Court of Protection to “adjudicate as between the claimant and the defendant””. That obligation arose from the provision in the settlement Order providing for release of the reverse indemnity undertaking by the Court of Protection.
Consideration was then given as to how that obligation could be discharged by the Court of Protection. Her Honour Judge Hilder concluded the settlement Order never intended to confer on the Court of Protection a delegated High Court jurisdiction. She concluded jurisdiction was one of approved consent by the parties in the litigation (given the terms of the settlement Order). Further, as the application came before her via the usual Court of Protection procedures, the framework of the Mental Capacity Act 2005 applied and therefore any decision made must by in BJB’s best interests. As such an issue of double recovery was not one for the Court of Protection to consider.
This decision is therefore very much fact specific.
What should a financial Deputy do when faced with a situation where P’s settlement award includes a reverse indemnity undertaking and funds are no longer sufficient to meet their needs?
The precise words of the reverse indemnity undertaking should be carefully considered to ensure they understand whether the matter is one where jurisdiction remains with the High Court or one which falls to the Court of Protection to consider.
Stacey Bryant
PDF Chair