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You are here: BAILII >> Databases >> Scottish Law Commission >> Scottish Law Commission (Reports) >> Report on Damages for Personal Injury (Report No. 266) URL: http://www.bailii.org/scot/other/SLC/Report/2024/SLC266.image12.html |
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Background
5.75 As discussed above in paragraph 5.32-5.38, we envisage an enhanced role for the Accountant of Court in order to provide a safeguard for awards of damages made to children. Our Discussion Paper1 explains that, currently, provisions which involve the Accountant of Court are used less frequently than might be expected.
Responses to Discussion Paper
5.76 In our Discussion Paper we asked the following questions:
“33. What do you think might explain the low usage of the provisions that involve the Accountant of Court?
34. What might increase use of these provisions?”
5.77 Thirteen consultees2 responded to Question 33. Several consultees suggested that the low usage may be explained by a lack of awareness of the provisions and, by extension, uncertainty as to how the provisions work, which ultimately exacerbate their low take-up. Three consultees 3noted that parental involvement may reduce the use of the provisions as the parent or guardian to whom payment is being made may consider that it is preferable to retain the freedom to seek professional advice on investment and administration outwith the court setting. One consultee 4thought that parents and practitioners may consider the option to be unattractive due to the low interest rates associated with the usage of the Accountant of Court. Three legal practitioners5 explained that firms generally obtain independent advice for clients, and that they rarely find it necessary to seek orders under section 11 or section 13, given that they are generally satisfied that the child’s damages will be safeguarded. Finally, one consultee 6noted that the courts generally prefer alternative orders which, when considered alongside the court’s lack of obligation to consider an order under section 13 unless moved to do so, may explain the low use of the provisions.
5.78 To address the low usage of the provisions, one consultee 7suggested the creation of a clear and established set of rules around when to refer a case to the Accountant of Court. Four consultees 8suggested that usage may increase if awareness of the provisions is raised, particularly within the legal profession and any other area in which advice is given to those who hold property owned by or due to a child. Five consultees9 said that making the involvement of the Accountant of Court mandatory or, alternatively, making the involvement of the courts mandatory, so as to determine the best interests of the child, would increase use of the provisions. Finally, one consultee 10recommended that all damages for children, regardless of the value of the damages and whether the settlement occurs pre-litigation or following proof, should be subject to approval and protections through the holding of the funds for the child until the age of 16.
Discussion
5.79 Two issues arose consistently throughout the responses - namely, a lack of clarity and awareness of the provisions, and low use of the provisions by the court.
5.80 As suggested by four consultees, the introduction of guidance may improve general awareness and understanding of the provisions. Guidance on the benefits of the provisions and their availability, as well as guidance on how and when to use the provisions, may encourage legal practitioners, as well as parents and guardians, to seek the assistance of the Accountant of Court where necessary. One consultee11 suggested that the Law Society of Scotland should produce guidance for practitioners. We agree that this is a sensible solution which will increase awareness of the provisions. We trust that appropriate guidance will be issued by the Law Society of Scotland and the Faculty of Advocates for practitioners on the use of sections 9 to 13 of the Children (Scotland) Act 1995 and the work of the Accountant of Court.
5.81 Low use of the provisions by the court was also highlighted as an issue. Linked to this was speculation amongst some consultees that the court may prefer alternative orders, such as payment to a parent or guardian under section 13(2)(b)(ii), and that a lack of direction surrounding the court’s discretion in utilising the provisions could also be contributing to the low usage rate. In addition to practitioners, judges and sheriffs may also benefit from increased awareness and understanding of the provisions. We trust that appropriate guidance will be issued by the Judicial Institute for Scotland for judges and sheriffs on the use of sections 9 to 13 of the Children (Scotland) 1995 Act and the work of the Accountant of Court.
5.82 We also considered whether remitting a case to the Accountant of Court should be mandatory; however, we do not wish to curtail the court’s discretion in this matter and are mindful of the cost implications of such an approach.
5.83 Instead, our approach is (i) to impose a duty of inquiry (with a possible option of remitting to the Accountant of Court after consideration of a number of factors) upon the court hearing the case; 12and (ii) to raise awareness of the provisions amongst practitioners and the judiciary. We are of the view that any further reforms are not merited at this time.
Background
5.84 Currently, where a child’s damages are paid directly into a trust, there is no independent oversight either of the terms of the trust, or of those who wish to be appointed as trustee or trustees. Our Discussion Paper 13recognises that this position contrasts with the situation in relation to adults with incapacity, where a guardian who has been granted power to set up a trust on behalf of an incapable adult must send a draft of the proposed trust deed to the Public Guardian for consideration, along with a statement explaining the rationale behind setting up the trust.14
5.85 In order to gain an understanding of current practice, we liaised with an Advisory Group who suggested that where awards of damages made to a child are to be paid directly into a trust, independent oversight of the terms of the trust, and of the choice of persons to be appointed as trustees, would be beneficial in reducing the risk of misappropriation or improper investment of funds. Independent oversight could also be triggered by a significant change in circumstances such as, for example, where there is a substantial increase in the assets held in a trust following a final settlement, or where there is a change of trustees.
Responses to Discussion Paper
5.86 In light of the general lack of oversight and the Advisory Group’s comments, in our Discussion Paper we asked:
“35. Do you consider that there is a need for independent oversight when it is
proposed to set up a trust for damages for personal injury awarded to a child?
36. Should such oversight be necessary in all cases, or only in certain specific circumstances? If the latter, what type of circumstances?”
5.87 Consultees’ responses to the question of whether independent oversight is necessary were mixed. Thirteen consultees responded to this question.15 Six consultees16 considered that there is such a need, whilst others considered that independent oversight may be beneficial in some, but not all, cases, 17or that there is no such need at all.18 The justification for the latter view was that the extent of misappropriation or improper investment of funds is unclear, and that families who take the step of setting up a trust for their child are also families who are protective of the funds involved and follow the advice of the professionals advising them.
5.88 Of the six consultees who said that independent oversight is necessary in all cases, four considered that arguably the appointed trustees could provide such oversight. 19The Association of Personal Injury Lawyers felt that it would be beneficial to ensure that the majority of trustees are not family members. Rather, as three consultees20 suggested, it would be wise to institute a requirement that the trustees appointed are professionally regulated persons, who are able to appropriately manage and invest funds with controlling interest, especially where larger sums are involved.
5.89 A minority of consultees 21who did not consider such oversight to be necessary were largely of the view that in most cases involving a trust, the child’s parents or relatives are appointed as trustees alongside a professional. It was suggested that by setting up a trust, the family are attempting to safeguard the award and are following the advice given to them by professionals. There is therefore less requirement to provide independent oversight.
5.90 The response from the Senators of the College of Justice queried whether the true extent of misappropriation or improper investment of funds is clear and if not, whether providing for independent oversight may be an unnecessary imposition.
5.91 In response to Question 36, whether oversight is necessary in all cases or only in certain circumstances, a clear majority considered independent oversight only to be necessary in some cases. There was less agreement about which cases. While one consultee22 gave a precise sum as a suggested minimum for independent oversight - £50,000 - others provided suggestions that were less focused on figures, and more on case-specific characteristics. One consultee 23suggested that oversight would not be necessary in “modest” cases, as these pose a lower level of risk of misappropriation of the funds. Five consultees 24suggested that oversight be employed in any case where there are concerns regarding the funds being misappropriated or not properly invested. One consultee 25said oversight would be necessary in cases where no independent professionally regulated trustee is appointed. Lastly, one consultee 26emphasised that any reform should be proportionate so as to mitigate the increase in the Accountant of Court’s workload and the associated cost implications.
Discussion
5.92 Responses to these questions ranged from oversight is needed in all contexts, to oversight is not needed at all. We are grateful to consultees for expressing their views on this challenging area.
5.93 As in the position reached in paragraphs 5.57-5.58 above, there appear to be significantly different views on whether there is a need for independent oversight of a trust and what form that oversight may take. We therefore recommend that the question of whether there should be independent oversight of a trust and if so, in what form, should be part of the standalone trust project referred to in paragraph 5.58.
Background
5.94 In our Discussion Paper we asked:
“37. If oversight is necessary, should it be achieved by:
(a) providing that a draft of the proposed trust deed be sent to the Accountant of Court for consideration and approval of its terms, including the suitability of the choice of trustees; and
(b) such oversight by the Accountant of Court also being triggered by any significant change in circumstances such as where there is a substantial increase in the assets held in a trust following a final settlement, or where there is a change of trustees; or
(c) another process? If so, what?”
5.95 The method of achieving independent oversight which we suggested was that a draft of the proposed trust deed be sent to the Accountant of Court for consideration and approval of its terms, including the suitability of the choice of trustees, and that such oversight by the Accountant of Court would also be triggered by any significant change in circumstances such as where there is a substantial increase in the assets held in a trust following a final settlement, or where there is a change of trustees (options (a)-(b) in Question 37). If consultees were not in favour of this method, they were asked for another process which they would consider suitable.
Responses to Discussion Paper
5.96 Of the 14 27consultees who responded to this question, nine 28favoured the method described above in options (a)-(b). The Association of Personal Injury Lawyers emphasised that the choice of trustees must be scrutinised, and that there must not be a majority of family members amongst trustees. They explained that initial scrutiny about the choice of trustees would be pointless if the trustees were “then free to remove certain trustees and select others without oversight once the trust was set up.” The Law Society of Scotland stated that if oversight is considered necessary, it should only arise “where there is no independent professionally regulated person appointed as a trustee with a controlling interest.” It is in this situation that they consider options (a)-(b) should apply.
5.97 The five remaining consultees29 did not consider that options (a)-(b) were appropriate. Digby Brown and the Forum of Insurance Lawyers reiterated their belief that oversight is unnecessary but, if implemented, the latter emphasised that it must be proportionate. Two other consultees suggested alternative procedures such as extending the powers of the Accountant of Court30, and including oversight as part of the court process on the conclusion of an action when the settlement is over a certain financial threshold31.
Discussion
5.98 We do not wish to speculate on how independent oversight of an award of damages for personal injury to a child may be achieved in the context of a trust. As demonstrated by the options listed in our Discussion Paper, and the variety of views expressed by consultees, this is a complex area which requires focused and specialist work. We consider that the issue of independent oversight should form part of the standalone trust project referred to in paragraph 5.58.
Background
5.99 We mentioned Personal Injury Trusts for children above and suggested that a standalone project with specialist trust input is undertaken to consider matters such as who has the power to direct an award into trust, and what type of trust. In the meantime, without delving into these issues, we can examine the use of Personal Injury Trusts with the evidence we have.
Responses to Discussion Paper
5.100 In our Discussion Paper we asked:
“38. Are Personal Injury Trusts the only type of trusts used for managing awards of
damages to children or are there others? If you have experience of other types of trust being used could you give examples?”
5.101 Eight 32out of the 13 33consultees who responded to this question were of the view that Personal Injury Trusts are the only type of trust used for managing awards of damages to children.
5.102 The minority of consultees who were not of this view provided a variety of reasons for their answer. The Law Society of Scotland stated that where the higher costs associated with a Personal Injury Trust are to be avoided, bare trusts may be used. In addition, where the value of the case is lower, a bare trust may be the preferred option. Drummond Miller explained that if damages are paid to a child as a consequence of their injury, then it would be unlikely that any trust other than a Personal Injury Trust would be appropriate. However, they state that if the award was being paid to a child as a result of a fatal claim, then another form of trust may be appropriate. Unite the Union and Thompsons Solicitors also considered that other types of trusts may be used, but the benefits provided by Personal Injury Trusts mean that others are not considered as frequently.
Discussion
5.103 It appears that Personal Injury Trusts are working effectively at the moment. Even consultees who referred to other types of trusts considered that Personal Injury Trusts often fit the needs of a child best. The only issue raised by consultees is that of the high costs associated with Personal Injury Trusts, which may at times result in bare trusts being used instead.
5.104 There appear to be significantly different views about what type of trust is appropriate for awards of damages made to children. We consider this to be a complex area which requires further consultation and research in a stand-alone project, as outlined in Recommendation 15.
Background
5.105 In our Discussion Paper we asked:
“39. Are there any other issues that arise in relation to the Accountant of Court or to
the court’s management and safeguarding of awards of damages to children? If so, please describe those issues and how they may be resolved.”
5.106 Three consultees34 provided a substantive response to this question. Digby Brown suggested that consideration should be given to expanding the role of the Office of the Public Guardian and explained the benefits of having a single body responsible for oversight of financial affairs for both incapable adults and children. Clyde & Co were of the view that the current measures are largely appropriate, and that the introduction of a Court of Protection equivalent would be extreme and costly. Nevertheless, Clyde & Co stated that there is scope to improve the current system. Direct Line Group emphasised that the current system is working well as evidenced by the lack of reported issues. They conclude that there is little need for reform other than providing the court with a discretionary duty to intervene as and when it is appropriate to protect the child’s interests.
Discussion
5.107 We refer to Recommendation 14, where we recommend that both the court and the Accountant of Court have an enhanced role when an award of damages is made to a child. The court will have a duty to inquire into the administration of the award and intervene if appropriate. The Accountant of Court also holds office as the Public Guardian and is best placed to provide oversight for awards of damages for a child when the court deems this necessary. We consider that this recommendation is an appropriate reform that would enhance the protection of a child’s damages.
Background
5.108 Section 9 of the Children (Scotland) Act 1995 deals with safeguarding a child’s property. It does not specifically refer to awards of damages. It applies where property held by a person, other than a parent or guardian of the child, is owned by or due to the child and would, but for a direction under section 9, require to be handed over to a parent or guardian to be administered on behalf of the child.
5.109 Originally, it was not anticipated that section 9 would form part of this project as it deals with a broad range of property. However, our attention was drawn to the section by a consultee advocating the removal of the monetary limits contained in section 9(2). Section 9(2) requires an executor or trustee holding property to apply to the Accountant of Court for a direction as to the administration of the property where the value of the property exceeds £20,000. Where the value of the property is not less than £5,000 and does not exceed £20,000, the executor or trustee has discretion to apply to the Accountant of Court. The consultee35 suggested that it would be helpful if those monetary limits were removed, thus giving greater flexibility to applications concerning a child’s property.
Accountant of Court consultation
5.110 Our Discussion Paper did not ask a question in relation to section 9. Therefore, to ensure we have the appropriate understanding of this area of law, we have liaised closely with the Accountant of Court on this point.
Discussion
5.111 Although alteration of the monetary limits was suggested by only one consultee, we believe that there is merit in the suggestion. The value of money changes over time. Using the Bank of England’s inflation calculator, 36£20,000 in June 1995 has an equivalent value of
£39,951 in September 2024. This raises the question of whether the monetary limits as they are currently set are correct, and if they are not, should they be amended to take account of the modern-day value of money.
5.112 In terms of a change to the monetary limits, we considered whether it would be desirable to tie the figure to inflation (rather than have a fixed value which will change over time). However, we are conscious that this may complicate matters for executors and trustees, as it would not be clear on the face of section 9 when the mandatory referral to the Accountant of Court is triggered.
5.113 One solution would be to remove the minimum threshold (£5000) which currently exists (as Digby Brown suggested), thus allowing greater flexibility. By removing the minimum threshold, a direction could be sought from the Accountant of Court if it was considered appropriate, regardless of monetary value. In order to ensure that oversight is still provided in high value cases, where the value of property exceeds £40,000 the executor or trustee should be required to apply to the Accountant of Court for a direction as to the administration of the property. This would mean that assistance from the Accountant of Court is an option in all cases, regardless of monetary value, and an obligation in cases where the value of the property exceeds £40,000.
5.114 We have liaised with the Accountant of Court about the possible impact of removing the minimum threshold and increasing the upper threshold. Consequences might be (a) a possible increase in queries relating to lower value property; and (b) the non-referral of some cases falling between the current upper threshold (£20,000) and the new threshold (£40,000), as referral for property valued below £40,000 would no longer be compulsory. We consider that these concerns are outweighed by the benefits of the suggested reform, in particular by the flexibility offered by removing the lower threshold (thus permitting access to the Accountant of Court in difficult albeit low value property cases) and also by the updating of the upper threshold for compulsory referrals to a more realistic level in light of the current value of money. The Accountant of Court has advised that she would be satisfied with such a change to section 9.
5.115 Between 2007-2023, the Accountant of Court provided over 1,750 Directions under section 9. It is realistic to assume that this number might increase should the minimum threshold be removed; however, as long as adequate resource is provided to assist with any increase in the number of Directions sought, the Accountant of Court is supportive of this change.
5.116 We note that section 9(8) gives Scottish Ministers the power to vary the sums referred to above in section 9(2), although it is not clear that that power can be exercised to entirely remove the £5,000 lower limit. We suggest that, following consultation, Scottish Ministers consider exercising their power to modify the monetary limits by subordinate legislation.
5.117 We therefore recommend that:
16. Scottish Ministers should consider exercising their power under section
9(8) of the Children (Scotland) Act 1995 to modify the monetary limits in section 9(2) of that Act by subordinate legislation.
See paragraphs 5.43-5.46 of the Discussion Paper.
Digby Brown, Drummond Miller, Zurich Insurance, Ronald E Conway, Clyde & Co, University of Aberdeen, Association of Personal Injury Lawyers, Unite the Union, Thompsons, DAC Beachcroft, Society of Solicitor Advocates, Kennedys Law, Law Society of Scotland.
Zurich Insurance, Kennedys Law, Drummond Miller.
Thompsons, Drummond Miller, Digby Brown.
Clyde & Co, University of Aberdeen, Digby Brown, Kennedys Law.
Thompsons, Unite the Union, Drummond Miller, Kennedys Law, Law Society of Scotland.
Association of Personal Injury Lawyers.
See Recommendation 14 above, at para 5.40 above.
See paragraphs 5.56-5.57 of the Discussion Paper.
See the Office of the Public Guardian (Scotland) website: FAQs (publicguardian-scotland.gov.uk).
Zurich, Clyde & Co, Association of Personal Injury Lawyers, University of Aberdeen, Kennedys Law, Law Society of Scotland, Forum of Insurance Lawyers, Senators of the College of Justice, Digby Brown, Drummond Miller, Unite the Union, Thompsons, Association of British Insurers.
Zurich, Clyde & Co, Association of Personal Injury Lawyers, University of Aberdeen, Kennedys Law, Law Society of Scotland.
Unite the Union, Thompsons, Association of British Insurers.
Forum of Insurance Lawyers, Senators of the College of Justice, Digby Brown, Drummond Miller.
Clyde & Co, Association of Personal Injury, Kennedys Law, Law Society of Scotland.
Clyde & Co, Forum of Insurance Lawyers, Law Society of Scotland.
Forum of Insurance Lawyers, Senators of the College of Justice, Digby Brown, Drummond Miller.
Clyde & Co, Unite the Union, Thompsons, Drummond Miller, Association of British Insurers.
Association of British Insurers.
Zurich Insurance, Clyde & Co, Association of Personal Injury Lawyers, University of Aberdeen, Unite the Union, Thompsons, Association of British Insurers, Kennedys Law, Law Society of Scotland, Drummond Miller, Ronald E Conway, Forum of Insurance Lawyers, Senators of the College of Justice, Digby Brown.
Zurich Insurance, Clyde & Co, Association of Personal Injury Lawyers, University of Aberdeen, Unite the Union, Thompsons, Association of British Insurers, Kennedys Law, Law Society of Scotland.
Drummond Miller, Ronald E Conway, Forum of Insurance Lawyers, Senators of the College of Justice, Digby Brown.
Ronald E Conway, Clyde & Co, Association of Personal Injury Lawyers, Forum of Insurance Lawyers, University of Aberdeen, Digby Brown, Association of British Insurers, Society of Solicitor Advocates.
Ronald E Conway, Clyde & Co, Association of Personal Injury Lawyers, Forum of Insurance Lawyers, University of Aberdeen, Digby Brown, Association of British Insurers, Society of Solicitor Advocates, Zurich Insurance, Unite the Union, Thompsons, Drummond Miller, Law Society of Scotland.
Clyde & Co, Digby Brown, Direct Line Group.
Inflation calculator | Bank of England as of September 2024.