Case Summary - PI compensation fund must be disregarded in means-testing

High Court rules on social care means-test disregard of personal injury damages managed by deputies.

In the case of ZYN v Walsall MBC [2014] EWHC 1918 (Admin) the High Court has ruled that capital derived from personal injury damages which is held by a Court of Protection appointed deputy is disregarded for means testing purposes. In doing so it has also clarified the nature of the relationship between the court, the deputy and the person lacking capacity.

The council argued that the disregard, contained in paragraph 44 of schedule 10 Income Support Regulations 1987, did not cover deputies on two grounds.

Does the disregard refer to the current Court of Protection?

The first point was that the legislation introducing the disregard was introduced before the existing Court of Protection was set up. The Mental Capacity Act 2005 abolished the pre-existing Court of Protection and set up a new Court. It was argued that the disregard could apply only to the previous body and that the common name and function of the old and the new bodies was not material.  This argument was opposed by ZYN on the apparently simple basis that the absence of any government action either to repeal the disregard, or to reintroduce it for the new body, indicated that the government was content that the legislation applied to the new body.

This proposition gave rise to a very lengthy and, at least for lawyers, very interesting discourse by Mr Justice Leggatt on statutory construction contrasting two approaches. There was the “historical approach” to construction by which the meaning of legislation is fixed in time and must be determined solely by reference to the circumstances which existed when it was passed. There was secondly the “updating approach”  which involved treating legislation as “always speaking” and which “allows the relevant statutory language to have a changing application.”

Mr Justice Leggatt concluded that the history of statutory construction suggested that in most circumstances legislation was intended to be read taking into account new social and technical developments, and that it was not intended by Parliament that the detail of old legislation should be constantly reviewed by Parliament to bring it up to date to reflect such social change. 

Whilst there were circumstances in which the historical approach was appropriate, this was not such a case. There was no reason to think that when it introduced the Mental Capacity Act 2005, Parliament intended that there should be a change in the relevant disregard.

Did the disregard apply where bests interests decisions were delegated to a deputy?

The second argument was that even if, as stated by the disregard, funds “administered on behalf of a person by…..the Court of Protection….or which can only be disposed of by order or direction of the court” were covered by the disregard, this description did not include funds, the control of which had been delegated to a deputy. Doubts had been expressed previously about this point but there had been no judicial decision.

The judgement states that Mr Lock QC for the council argued that “a receiver appointed by the old Court of Protection was an agent of the court and accountable to the court. By contrast, he submitted that a deputy appointed under the 2005 Act does not administer property on behalf of the court but on behalf of the person lacking capacity.” In support Mr Lock pointed to the fact that supervision of a deputy is conducted by the Office of the Public Guardian rather than the court. (Paragraph 71)

The judge noted sections 16(2) & 19(6) MCA 2005 which respectively empower the court to appoint a person to make decisions on P’s behalf and confer on the deputy the status of agent of P. He took the view that “this provision merely makes express in relation to a deputy what was already regarded as implicit in relation to a receiver” (paragraph 66). He referred to the Explanatory Notes to the 2005 Act which state that:

“Case law has established that receivers appointed by the original Court of Protection under Part 7 of the Mental Health Act 1983 are agents but it is considered helpful to make statutory provision to that effect in relation to deputies.”

The judge held (at paragraph 71) that:

“It is a false dichotomy to suppose that acting as the agent of the person who lacks capacity is incompatible with acting as the agent of the court. Where the court itself administers the capital of someone who lacks capacity, it clearly acts as the agent of that person. Indeed it is a prerequisite for paragraph 44(1)(a) to apply that the relevant sum of capital is administered by the court “on behalf of a person.”

At paragraph 73:

“The fact that the deputy is exercising a delegated responsibility is further confirmed by the ability of the court at any time to vary the powers conferred on the deputy or to withdraw the powers by revoking the deputy’s appointment.”

Capital held by a deputy was therefore subject to the disregard.

Is capital which can be disposed of at the discretion of the deputy controlled by the court?

The council raised a further argument that where a deputyship order authorises the deputy to withdraw a specified sum without needing to obtain prior court approval, this was not covered by the disregard of sums “which can only be disposed of by order or direction of any such court.”

This argument could not determine the case on its own given that the judge had already ruled that capital administered by a deputy came within the disregard of capital administered by the Court of Protection, which is a freestanding disregard in its own right. However the judge addressed the point in any event and rejected it on the basis that it had absurd consequences commenting at paragraph 82 that:

“I cannot see how any rational policy maker could make the right of a local authority to charge for the cost of care services dependent on the size of the amount which a deputy is permitted to withdraw and spend without the prior approval of the court at any given time.” 

Was this the real argument?

The judge concluded that:

“For the reasons given, I find that the Council’s policy on charging for the cost of social care services is unlawful insofar as it takes account of any of the capital derived from the claimant’s personal injury settlement.”

This is a full rejection of the proposition that in domiciliary care cases, councils can take account of personal injury capital held by a deputy which is derived from personal injury compensation.

However a curious feature of this case is the manner in which the council argued its position on a basis that a judge was always likely to try and find a way to dismiss because of its unattractive consequences, which were eloquently exposed in the judgement.

The council did not raise the argument, now pursued by most councils, that since the disregard is only applicable in consequence of the Fairer Charging Guidance, they are entitled to depart from that guidance where they have a good enough reason to do so.

Perhaps this was not pursued because the council lacked confidence in it, or perhaps Walsall felt they didn’t have a good reason and had to rely in the inapplicability of the disregard as a matter of law. In any event this case does not resolve the issue of law most commonly faced by disabled people seeking local authority support, who have some, but not enough personal injury compensation to meet their needs.