R(IS) 10/01
(Beattie v. Secretary of State for Social Security [2001] EWCA Civ 498)
Mr. P. L. Howell QC	CIS/114/1999
9.9.99 
CA (Butler-Sloss P, Pill and Parker LJJ)
9.4.01
Income - payments of structured settlement annuities from personal injury damages - whether capital treated as income
At the age of 17 the claimant was involved in a catastrophic accident which left him permanently quadriplegic. In February 1992 the claimant was awarded income support, a claim having been made on his behalf by his father. In October 1992 the claimant received personal injury damages totalling over £1.5 million. From this sum over £1 million was placed in a structured settlement in the form of annuities which guaranteed future payments to the claimant. Details of the annuity payments were not provided to the Department and the claimant’s income support continued to be drawn. The annuity payments came to light in 1996 and the adjudication officer issued a decision that the claimant had not been entitled to income support and that consequently there had been a large overpayment. The tribunal held that the annuity payments had to be included in the calculation of the claimant’s income for income support  purposes and directed that the amount of income was to be calculated under regulation 53 of the Income Support (General) Regulations 1987. The adjudication officer appealed to the Commissioner who allowed the appeal, holding that the tribunal’s directions under regulation 53, which provides for the calculation of “tariff income” from capital, were incorrect. The status of annuity payments for income support purposes was determined conclusively by regulation 41 of the 1987 regulations, regulation 41(2) prescribing that all payments received under an annuity are to be treated as income. The question of the recoverability of the overpayment was not pursued before the Commissioner.  The claimant appealed to the Court of Appeal.
Held, dismissing the appeal, that:
the annuity payments made by virtue of the October 1992 agreement fell within the category of capital treated as income under regulation 41. In particular the payments clearly fell within the terms of regulation 41(2).

DECISION OF THE SOCIAL SECURITY COMMISSIONER
1.	My decision is that the decision of the social security appeal tribunal given on 7 October 1998 was erroneous in point of law in the directions they gave about how the claimant’s income was to be calculated for income support purposes. I set that decision aside and substitute my own that for the reasons explained below the claimant was not entitled to income support after the end of October 1992, because at all material times from then on his income (or payments falling to be treated as income) under a “structured settlement” damage award made to him in that month exceeded his applicable amount. 
2.	On that basis there has been a substantial overpayment of income support in this case, because the relevant information about the damage settlement and the claimant’s resources was not provided to the department for some years and income support continued to be paid without regard to it. However the tribunal found as a fact that no wrongful failure to disclose information was involved, and this finding has been expressly accepted by the department. On that aspect of the matter I simply confirm the tribunal’s finding, so that no question of recovery of the overpaid benefit can arise. 
3.	This is a tragic case. The claimant is a man now aged 29, who at the age of only 17 was involved in a catastrophic road traffic accident which has left him permanently quadriplegic and unable to manage his own affairs. The accident devastated not only his own life but that of both his parents, who have been endeavouring to look after him themselves with the help of nurses in his own home since he was released from hospital in 1991. His affairs are wholly managed by his father as his receiver appointed by an order of the Court of Protection dated 
21 November 1990 a copy of which is at page 24 of the appeal file. 
4.	On 29 February 1992 a claim for income support was made by the claimant’s father on his behalf (pages 2 to 19) stating specifically that the claimant had no income or other money coming in. Income support was awarded to the claimant on the basis of that claim. 
5.	In October 1992, the claimant received an award of damages in respect of his injuries in a total sum of over £1.5 million. Just over £1 million of this was in the form of the “structured settlement annuities” which give rise to the main issue on this appeal. 
6.	Although what he had said on the original form about there being no money coming in ceased to be correct following the damage settlement, the claimant’s father continued to draw income support for his son without supplying any details of the annuity payments or other award money to the department. Apparently he considered, or was advised, that because of the nature of the damage award and the payments it was not necessary to do this and that they had no effect on income support entitlement. However when the department eventually did find out about the payments in 1996, they took a different view. An adjudication officer issued a decision to the effect that the claimant had not been entitled to income support, and that in consequence a large amount of benefit had been overpaid to him.
7.	The sole issue on the appeal to me is whether income support was rightly payable after the claimant’s damage award had been made and the annuity payments had commenced. As noted above the question of whether any overpaid benefit was recoverable from the claimant or his father is not now being pursued. 
8.	The tribunal held that the annuity payments received by or on behalf of the claimant from October 1992 onwards had to be included in the calculation of his “income” for income support purposes and could not be disregarded. However they then went on to give certain directions about the way such “income” should be calculated, which the adjudication officer considers to be incorrect. He therefore appeals against the tribunal’s decision with a view to getting the legal position clarified. 
9.	I held an oral hearing of the appeal which had been requested by the claimant’s father. Leo Scoon of the solicitor’s office, Department of Social Security, appeared for the adjudication officer. The claimant’s father appeared in person as his son’s receiver, assisted by his wife who also addressed me. The claimant himself was also brought to the hearing accompanied by two nursing attendants but did not address me. (It had earlier been indicated at my express direction that he need not be subjected to the ordeal of attending in person or making the long journey involved, as the hearing would be concerned only with legal questions and his father was acting on his behalf).
10.	An appeal involving such tragic circumstances inevitably carries an emotional charge, and the burden being carried by both of the claimant’s parents was readily apparent. As they explained to me, the practical implications of the decision on whether their son was entitled to income support were much greater than would appear at first sight, because his entitlement to numerous other benefits (including in particular payments that had already been received from the Independent Living Fund) depended directly upon it. 
11.	It is as well therefore to remind myself that the issues I must decide are not concerned with what type of care is best for their son, or how the resources for this may best be found to provide it, but are confined in accordance with s. 23, Social Security Administration Act 1992, to the narrow and specific questions of whether the tribunal erred in law in the way they applied the social security regulations, and if not what other decision must be made so as to comply with the terms of those regulations, which are binding on me as well as on the tribunal and the adjudication officer. 
12.	The material facts relating to the claimant’s damage settlement, adopted by the tribunal in their recorded findings of fact at page 59, are conveniently set out at pages 31 to 32 in a letter dated 25 March 1998 from the firm of financial advisers who specialise in such settlements and dealt with this case on behalf of the claimant. The most relevant are that after allowing for interim payments already made and the reimbursement of past care costs, (1) a sum of just over £70,000 had been placed in trust for the benefit of the claimant under the supervision of the Court of Protection, and (2) two structured settlement annuities, providing periodic sums for his maintenance, had been purchased at a cost of something over £1 million. 
13.	The annuities provide an index-linked monthly income for the claimant, approximately £6,100 a month at the date of the tribunal hearing, supplemented as his parents explained to me by somewhat larger payments every few years designed to cover the cost of replacing the special equipment he needs. As shown by the specimen bank statement at page 26 and the other evidence already referred to, the monthly annuity instalments are paid into a separate bank account in the name of the claimant’s father designated as trustee for his son, and wholly used to pay his very substantial care costs for which cheques are drawn by his father throughout each month as and when needed. 
14.	(1) The fund held at the Court of Protection (described as the “contingency fund”) is represented by investments and cash on deposit held in court for the absolute benefit of the claimant subject to the directions of the court and the powers exercised by his father as receiver under the first general order of 21 November 1990 at page 24. Details of the assets comprising this fund as at 24 January 1996 are given in the note provided by the Public Trust Office on page 28, but I was told by the claimant’s parents that since then recourse has had to be had to the capital of this fund for their son’s benefit so that its value has now reduced to about £50,000. It is common ground that for income support purposes the contingency fund counts as a trust fund derived from a payment made in consequence of personal injury to the claimant, and accordingly that its capital value falls to be disregarded under para. 12, Sch. 10, Income Support (General) Regulations 1987, SI 1987 No. 1967, in assessing his resources, by virtue of the decision of Mr. Commissioner Heald QC in case CIS/ 368/1994. The fund does of course produce some income, all of which has been applied for their son’s benefit. Such income will count as his income in the normal way as and when received by him or on his behalf: see the tribunal’s decision at pages 59A-B and para. 18 below. However the amounts involved are of much less significance in this appeal then the payments received under the annuity arrangements, and to those I now turn. 
15.	(2) The nature of the “structured settlement annuity” arrangements made for the claimant in this case appears most clearly from the following passage in “Kemp and Kemp on Damages”, March 1998, chapter 6A at page 6304. (I should note that this chapter on the somewhat specialised topic of these settlements is directly derived from material provided by the same firm of financial advisers as arranged this claimant’s settlement, and supplied the details of it on pages 31-32: see the note at page 6302 ibid):
“The specialised annuity contract.
A structured settlement involves the plaintiff receiving part of his damages in the form of a stream of future annual payments, rather than as a single capital sum at the date of judgment or compromise. The periodical payments are guaranteed to last the lifetime of the plaintiff or such other period of loss as may be specified. In addition, the plaintiff will receive part of his damages as a traditional lump sum which will pay for essential accommodation, transport, equipment or other similar needs and then act as a contingency fund for the future.
The structured settlement is, in essence, a specialised annuity contract which involves the plaintiff, the defendant and the life office. It enables a portion of the agreed damages to be paid by future annual payments over the lifetime of the plaintiff. The sum which forms the structured element is used by the casualty insurer [the insurer behind the defendant responsible for the injury] to purchase an annuity from a life office in the name of the plaintiff. The life office then makes regular periodical payments to the injured party, as the policy holder, for the balance of his life. These payments, being instalments of capital, do not attract income tax in the hands of the plaintiff. The remaining balance of the agreed settlement figure is the residual contingency fund, which remains at the disposal of the plaintiff in the normal way.”
16.	Although the actual documents were not produced to me I am satisfied, from the documentary evidence in this case and what I was told by the claimant’s father, that the annuity arrangements at issue in the present appeal are of this type. As the claimant’s father told me there is a policy document (or rather two policy documents) under which index-linked monthly payments, currently at the level of some £6,300 per month and continuing throughout his son’s life after the expiry of an initial ten year guaranteed period, are made into the bank account he operates on his son’s behalf; with supplementary amounts that become payable in lumps of some £10,000 every three years, intended to cover new specialist equipment and other recurring capital expenses. 
17.	I am satisfied that the right to go on receiving the payments under these annuity arrangements is, as a matter of general law, a right which belongs beneficially to the claimant himself, although of course administered on his behalf along with all his other assets by his father as receiver under the supervision of the Court of Protection. In those circumstances the capital value of the annuities themselves is, like the capital value of the contingency fund held in court, wholly disregarded as a capital asset of the claimant when computing his resources for income support purposes, by virtue of either or both of paras. 11 and 12 of Sch. 10 to the Income Support Regulations already cited. This appears to have been common ground before the tribunal: see page 59A.
18.	The tribunal were thus entirely right in my view to identify the real question they had to consider as whether the periodical payments received under the annuity arrangements, together with any income received from the contingency fund, should be taken into account in calculating the claimant’s income under the regulations. They were again right in my judgment in holding (on page 59B) that the income from the contingency fund could not be excluded under para. 22 of Sch. 9 to the regulations, since although that paragraph provides for income from certain types of capital to be disregarded there is a specific exception of income derived from capital which itself has been disregarded under Sch. 10, para. 12, the result being that such income must fall into the calculation in the normal way. 
19.	However I am satisfied that as submitted by the adjudication officer and by Mr. Scoon the tribunal did fall into error in the directions they gave on pages 59B to 59D about the basis on which the payments received under the annuity were to be brought into account. As Mr. Scoon pointed out, the tribunal do to some extent misquote the relevant regulations on those pages, and the explanation of their reasons does become to some extent confused and hard to follow (in what is admittedly a very difficult area).
20.	In particular, I am satisfied that their stated conclusion on page 59B that “Each instalment when paid should be treated as a payment of income, and assessed in terms of regulation 53 of the 1987 regulations” (which involves treating the amount of the monthly payments in excess of £3,000 as equivalent to weekly income of £1 for each £250 in excess of £3,000 but not exceeding £8,000) was wrong. The regulation to which they referred is a provision for the calculation of “tariff income” from capital which only becomes applicable where, in the words of reg. 53(1) “the claimant’s capital calculated in accordance with this Part” exceeds a prescribed figure and a notional income equivalent has to be calculated. It is plain that the initial condition was not met on the evidence before the tribunal in this case, as the claimant’s actual capital assets were excluded from the calculation by the provisions noted above. For that reason I set their decision aside.
21.	In my judgment, Mr. Scoon was right in arguing that the status of the annuity payments for income support purposes is conclusively determined not by reg. 53 but by reg. 41, and that this requires them to be treated as income of the claimant as and when received month by month, even though under the general law or for income tax purposes they may constitute capital in his hands rather than income. The regulation, which is headed “Capital treated as income”, prescribes in unqualified terms that all payments received under an annuity are to be treated as income (see reg. 41(2)) and in my judgment the annuity payments at issue in this case fall squarely within that provision. Since it is common ground that they represent instalments of an agreed sum of damages I further accept Mr. Scoon’s primary submission that they also fall within reg. 41(1), which requires capital instalments to be treated as income. (The difference between reg. 41(1) and 41(2) is immaterial for present purposes, as there is no suggestion that the claimant’s life expectation is so short that the aggregate future monthly payments would be within the prescribed exception for outstanding amounts below £8,000 or £16,000.)
22.	For the reasons given by the tribunal on page 59C I agree with them that the earlier reference by the adjudication officer to reg. 42 (notional income) is not relevant, as there is no question of the claimant having deprived himself of income to secure income support, and reg. 42(4) (about income payments to a third party) is not necessary to consider in view of my conclusion on the annuity payments themselves.
23.	The main argument advanced by the claimant’s father was that it had been his understanding, at the time of the damages settlement and subsequently, that his son’s normal living expenses would continue to be met by income support, leaving the whole of the damages settlement including the money received from the annuities to meet the extra expenses for his nursing care and the special equipment he needs. Such an understanding, even if contributed to by those advising him on behalf of his son at the time, cannot affect the interpretation of the Income Support Regulations. But in any case I am not sure if it can be correct that the assessment of damages would have excluded what the claimant needed to provide for his own living expenses; indeed his father expressly confirmed to me that (as one would expect) the settlement calculation did included compensation for the loss of his son’s earning power. The claimant’s parents are naturally and rightly concerned to see the best possible provision made for their son but that cannot I think justify the assumption that clever wording or “structuring” of a damages settlement can put the responsibility for ordinary living expenses over on to the general community by way of income support, instead of the person liable to pay compensation for the injury that left him unable to provide for those expenses himself.
24.	For those reasons the adjudication officer’s appeal is allowed, the decision of the tribunal set aside and my own decision substituted as set out in paragraph 1 above.

	(signed) Mr. P. L. Howell QC
Date: 9 September 1999	Commissioner

The claimant appealed to the Court of Appeal. The decision of the Court of Appeal follows.

DECISION OF THE COURT OF APPEAL

Mr. W. Braithwaite QC and Mr. L. Browne (instructed by Messrs Meloy Whittle Robinson) appeared for the Appellant.
Miss N. Lieven (instructed by the Solicitor to the Department of Social Security) appeared for the Respondent.

Judgment (reserved)

LORD JUSTICE PILL:
1.	This is an appeal by Charles Alexis Beattie, a patient, by his Litigation Friend and Court of Protection Receiver Stephen Kenneth Beattie against a decision of the social security Commissioner Mr. P. L. Howell given on 9 September 1999. The Commissioner held that the claimant was not entitled to income support after the end of October 1992 because at all material times from then on his income (or payments falling to be treated as income) under a “structured settlement” damages award made to him in that month exceeded his applicable amount. Section 124(1) of the Social Security Contributions and Benefits Act 1992 provides, amongst other things, that a person in Great Britain is entitled to income support if he has no income or his income does not exceed the applicable amount. 
2.	Tragically, the claimant, then 17 years old, was involved in a road accident which rendered him quadriplegic. His claim for damages was compromised in October 1992 in the sum of £1,521,976. Mr. Stephen Beattie is his father and had in November 1990 been appointed by the Court of Protection as the claimant’s receiver. The Court’s first general order dated 21 November 1990 provided that:
“As from the date hereof so much as maybe necessary not exceeding the net income of the patient is allowed for the maintenance and general benefit of the patient and for such other purposes as the Court may from time to time direct and insofar as the net income of the patient may be insufficient for those purposes the receiver is to apply to the Court for resort to capital.”
3.	The agreement providing for a structured settlement was made pursuant to advice from counsel and accountants specialising in this field. The Court of Protection authorised the receiver to sign, in the name and on behalf of the claimant, an agreement with Cigna Insurance Company of Europe. It was noted in the agreement that a sum of almost £400,000 had already been paid and that a further sum of almost £100,000 be paid forthwith. That sum was paid into a contingency fund which is not the subject of dispute in these proceedings. 
4.	The agreement was dated 19 October 1992 and also provided for regular payments to the receiver. The sum of £5,382.48 was to be paid monthly and there was to be a minimum of 120 payments, regardless of the date of death of the claimant. But, subject to that, no amounts would be payable after the death of the claimant. The agreement provided for increases (or decreases) annually in proportion to the increase (or decrease) in the general index of retail prices. The agreement further provided for a payment of £10,065.36 at the end of each three years with a minimum of six such payments and a similar link with the general index of retail prices. It was agreed that the liability of the insurer to discharge the balance of the debt of £1,521,976 to the claimant would be discharged in that manner. At the date of the hearing before the social security appeal tribunal on 7 October 1998, the monthly payment by the insurance company was about £6,100. This is not a discretionary scheme. It provides for regular payments of a specific amount which can readily be calculated.
5.	The nature of the structured settlement following an award of damages for personal injuries was set out in Chapter 6A of Kemp and Kemp on Damages (March 1998). The Commissioner set out the passage in his decision noting that the information had been derived from material supplied by the firm of accountants who had arranged the settlement in the present case. 
“The specialist annuity contract.
A structured settlement involves the plaintiff receiving part of his damages in the form of a stream of future annual payments, rather than as a single capital sum at the date of judgment or compromise. The periodical payments are guaranteed to last the lifetime of the plaintiff or such other period of loss as may be specified. In addition, the plaintiff will receive part of his damages as a traditional lump sum and which will pay for essential accommodation, transport, equipment or other similar needs and then act as a contingency fund for the future.
The structured settlement is, in essence, a specialised annuity contract which involves the plaintiff, the defendant and the life office. It enables a portion of the agreed damages to be paid by future annual payments over the lifetime of the plaintiff. The sum which forms the structured element is used by the casualty insurer [the insurer behind the defendant responsible for the injury] to purchase an annuity from a life office in the name of the plaintiff. The life office then makes regular periodical payments to the injured party, as the policy holder, for the balance of his life. These payments, being instalments of capital, do not attract income tax in the hands of the plaintiff. The remaining balance of the agreed settlement figure is the residual contingency fund, which remains at the disposal of the plaintiff in the normal way.”
6.	It is common ground that the capital in the contingency fund, which is held in the Court of Protection, is, for present purposes, to be disregarded. It is also common ground that the income produced by the fund, which has been applied for the claimant’s benefit, does, for present purposes, count as the claimant’s income as and when received by him or on his behalf (paragraph 14 of the Commissioner’s decision).
7.	A person is not entitled to income support if his capital or a prescribed part of it exceeds the prescribed amount. However, regulation 46 of the Income Support (General) Regulations 1987 provides that there shall be disregarded from the calculation of a claimant’s capital any capital, where applicable, specified in Schedule 10 to the regulations. It is conceded on behalf of the respondents that the capital sum agreed when the personal injury claim for damages was compromised, and all parts of it, are, by reason of the schedule, to be disregarded as a payment made in consequence of the claimant’s injury. 
8.	The question then arises whether the claimant’s income exceeds the applicable amount. Part V of the 1987 Regulations makes provision for the calculation of income for the purposes of section 124(1) of the Act. Regulation 29 provides for the calculation of earnings derived from an employed earner’s employment and, in paragraph 5, that income which does not consist of earnings shall be calculated in accordance with Chapter V. In that Chapter, regulation 40(1) provides, insofar as is material, that for the purposes of regulation 29 (calculation of income other than earnings) the income of a claimant which does not consist of earnings to be taken into account shall  …   be his gross income and any capital treated as income under regulation 41. Regulation 40(2) provides that there shall be disregarded from the calculation of a claimant’s gross income under paragraph (1) any sum, where applicable, specified in Schedule 9 to the regulations. Schedule 9 is headed “sums to be disregarded in the calculation of income other than earnings”, and sets out a number of types of payment. It is not submitted that any of them cover the present situation.
9.	Regulation 41 is headed “Capital treated as income” and provides, insofar as is material, that any capital payable by instalments shall (if above a specified amount) be treated as income. Regulation 41(2) provides that “Any payment received under an annuity shall be treated as income”. Regulation 42 is headed “Notional income” and regulation 42(1) provides that “A claimant shall be treated as possessing income of which he has deprived himself for the purpose of securing entitlement to income support or increasing the amount of that benefit.” Regulation 42(2), insofar as is material, provides that “Except in the case of a trust derived from a payment made in consequence of a personal injury, income which would become payable to the claimant upon application being made but which has not be acquired by him shall be treated as possessed by him but only from the date on which it would be so acquired”.
10.	The Commissioner found that the appeal tribunal’s directions upon how the claimant’s income was to be calculated for income support purposes was erroneous in point of law. It is not necessary to set out the directions because reliance is not placed on them. The Commissioner’s conclusion was:
“In my judgment, Mr. Scoon was right in arguing that the status of the annuity payments for income support purposes is conclusively determined not by reg. 53 but by reg. 41, and that this requires them to be treated as income of the claimant as and when received month by month, even though under the general law or for income tax purposes they may constitute capital in his hands rather than income. The regulation, which is headed “Capital treated as income”, prescribes in unqualified terms that all payments received under an annuity are to be treated as income (see reg. 41(2)) and in my judgment the annuity payments at issue in this case fall squarely within that provision. Since it is common ground that they represent instalments of an agreed sum of damages I further accept Mr. Scoon’s primary submission that they also fall within reg. 41(1), which requires capital instalments to be treated as income.”
The Commissioner also found that regulation 42 was not relevant “as there is no question of the claimant having deprived himself of income to secure income support”.
11.	For the claimant, Mr. Braithwaite QC submits that the situation cannot be treated simply as a contract between claimant and insurer which would attract the operation of regulation 41. The contract is under the supervision of the Court of Protection and a broad view of the effect of the arrangement should be taken, bringing into effect the provisions of regulation 42 which may exclude arrangements such as the present one. Moreover, the payments should be treated as payments to a third party, the receiver, and, by virtue of regulation 42(4) should be taken into account only insofar as it is proved, which it was not in the present case, to the extent that it was used for the basic needs of the claimant. A broad view of the regulations permits damages for personal injuries to be ignored for income support purposes. The sum remains capital under regulation 41 and regulation 42 is permitted to come into play.
12.	Mr. Braithwaite also relies on guidance notes issued by the DSS which, he submits, support his submission as to the effect of the regulations. While accepting that they are not directly at point, he refers to decisions of other Commissioners to illustrate his general submission that a broad view, which excludes the operation of regulation 41, should be taken.
13.	I regret that I am quite unpersuaded by these submissions. I reject first the reliance upon the guidance notes and correspondence of the Department. I accept the submissions of Miss Lieven, for the respondent, that save in one letter in which a mistake was made, the documents either were correct or were dealing with situations different from the present one. Neither do the Commissioners’ decisions assist the claimant. The error identified by Deputy Commissioner White in CIS/2299/1998 was the assumption, as to which there was no information, that income from a trust fund was paid to a claimant. The error identified by Commissioner Heald in CIS/368/1994 was the failure to accept that a fund was capital to be disregarded under Schedule 10 of the regulations. In the present case it is conceded that the fund is to be disregarded as capital. The same point was in issue before Commissioner Powell in CIS/4037/1999. A monthly payment was made by the Court of Protection to the Receiver but the circumstances were different from the present. The capital was held by the Court and was, in the view of the Commissioner, to be disregarded as capital by virtue of paragraph 44 of Schedule 10 and was excluded as income by paragraph 22 of Schedule 9. 
14.	I see no escape from the conclusion that the payments made by virtue of the agreement of 19 October 1992 come within the category of capital treated as income under regulation 41 and are therefore to be treated as income for the purposes of the regulations. I agree with the Commissioner’s analysis. Annuities are dealt with expressly in regulation 41(2) and the payments come within that category. It is not disputed that the payments are received under an annuity and that word has rightly been ascribed to them throughout these proceedings. In Scoble v. Secretary of State in Council for India [1903] 1 KB 494, Mathew LJ stated, at p. 504, that “an annuity means generally the purchase of an income, and usually involves a change of capital into income, payable annually over a number of years”. Considering the difference for tax purposes between an annuity and an annual payment which is in truth a capital payment in Southern-Smith v. Clancy [1941] 1 KB 276, Goddard LJ stated, at p. 293:
“The only principle that I can deduce from the cases is that the Court must have regard to the true nature of the transaction from which the annual payment arises and ascertain whether or not it is the purchase of an annual income in return for the surrender of capital.”

15.	The present arrangement is a typical example of an annuity and, as the Commissioner put it, falls squarely within regulation 41(2). The acceptance in argument of the use of the word “annuity” is not critical to the decision in the present case. Had a different word been used, the Court would have considered the true nature of the transaction which, upon the arrangement made in this case, provides for an annuity within the meaning of regulation 41(2). The payments may also constitute a capital payment by instalments, within the meaning of regulation 41(1), but I prefer to treat it as an annuity. 
16.	I agree with Miss Lieven that that is the single point in the case and the appeal must fail. The continuing role of the Court of Protection does not have a bearing upon the operation of regulation 41, given the arrangement made. Regulation 42 does not come into play. Under the heading “Notional income”, it provides for circumstances in which a claimant is to be treated as possessed of income he does not have but that does not arise because the claimant does have regular income from the capital sum. In any event, I reject entirely the suggestion that, because a receiver has been appointed, the payments can be treated as payments of income to a third party for the purposes of regulation 42. The payments are made for the benefit of the claimant and his receiver is not a third party for the purposes of section 42(4)(a).
17.	Reference was made, in the course of submissions, to ways in which it might be argued that periodic payments out of a personal injury award of capital should not be treated as income for present purposes. Some of them have been considered by Commissioners. It would not be appropriate in deciding this appeal to attempt a comprehensive review which would involve, amongst other things, a detailed consideration of Schedules 9 and 10 and the relationship between paragraphs (1) and (2) of regulation 42. I add only that whatever other considerations may apply in some cases, the approach by way of structured settlement adopted in this case does have the merit of providing the claimant with regular and quantifiable payments throughout his life.
18.	I would dismiss this appeal.

LORD JUSTICE JONATHAN PARKER:
19.	I agree.

THE PRESIDENT:
20.	I also agree.

Order: Appeal dismissed; no order as to costs. (Order does not form part of approved Judgment.)