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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.image11.html |
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5.1 In Chapter 5 of the Discussion Paper, 1we considered awards of damages made to children. We investigated the operation of section 13 of the Children (Scotland) Act 1995, the low usage of remits to the Accountant of Court, the court’s discretion in deciding the method of payment of an award, and the use of trusts to manage awards.
5.2 In this Chapter, we discuss the above issues, examine the responses to the questions posed in Chapter 5 of the Discussion Paper and outline our conclusions. We are conscious that awards of damages to children may be vulnerable to ill-advised investment or misappropriation. We therefore approach this Chapter with the safeguarding and protection of a child’s award of damages in mind.
5.3 For clarity, when we refer to a ‘child’, we are referring to a person under the age of 16. The definition of a child varies in different legal contexts in Scotland. The Children (Scotland) Act 1995 and the Children and Young People (Scotland) Act 2014 define a child as a person under 18 years of age. Similarly, the United Nations Convention on the Rights of the Child (“UNCRC”) defines a child as a person who has not attained the age of 18. However, the Age of Legal Capacity (Scotland) Act 1991 provides that the age of legal capacity in Scotland is 16. Likewise, the Adults with Incapacity (Scotland) Act 2000 defines an adult as someone aged 16 or over, and in the context of safeguarding and managing children’s property (the subject matter of this Chapter), the involvement of the Accountant of Court can continue until the child’s 16th birthday. The safeguards and protections for awards of damages made to children identified below are, therefore, aimed at ensuring a child is protected up until their 16th birthday. Should a child lack capacity to take ownership of their award at this stage, the Adults with Incapacity (Scotland) Act 2000 protections would then apply.
5.4 Our research in this area has led us to conclude that it would be beneficial for children and families if there was increased oversight of an award of damages made to a child. We consider that it would be advantageous to place a new duty on the court to inquire into the future administration of an award of damages made to a child, and for the pursuer’s agents to be required to explain to the court (by way of a form) how the award will be safeguarded. Taking into account this information and other relevant factors, such as the level of damages awarded and the future care and accommodation needs of the child, the judge will have to decide whether to remit the case to the Accountant of Court for oversight, or, if the judge decides this is not necessary, the judge must explain in a written report why that is the case.
5.5 It is our hope that by legislating for this type of supervision in all cases, the risk of misappropriation or ill-advised investment of a child’s award of damages is mitigated. The court’s inquiry into the future administration of the award will encourage parties to plan appropriately in regard to how the award will be used in the best interests of the child and explain this to the court. Thereafter, the court will have the discretion to refer the case to the Accountant of Court for advice on how the award should be managed. This approach will also provide clear guidance to the judge or sheriff, and ensure that there is some element of consistency of practice for parents and their advisers. This policy forms Recommendation 14 of the Report and is the headline recommendation (from which all other recommendations flow) in this Chapter.
5.6 In relation to trusts, ultimately, we recommend in Recommendation 15 that there should be a standalone Commission project, with trust specialist input, entitled “Personal Injuries, Children, and Trusts”, focusing amongst other things on (i) whether section 13 of the Children (Scotland) Act 1995 empowers the court to order payment of a child’s damages into a trust; (ii) if so, whether the trust could be a bare trust, or a substantive trust, or a Personal Injury Trust; (iii) to what extent the court is able to define the purpose(s) of such a trust; (iv) what happens where a court or the Accountant of Court has some continuing supervision in respect of funds held in a trust, and a difference of view arises between the trustees and the court/Accountant of Court; and finally (v) whether there should be independent oversight of an award of damages for a child which is to be placed into a trust, and if so, what form that oversight should take and whether such oversight should be necessary in all cases or only in certain specific circumstances. Nevertheless, we consider that the research, the consultees’ responses to our questions, and the outline recommendations made in this Report may provide a suitable basis for a standalone project in a trust context. We are grateful for all of the contributions we have received from consultees which have helped inform these recommendations.
Background
5.7 Section 13 of the Children (Scotland) Act 1995 is the key provision which deals with managing and safeguarding awards of damages to children. Section 13 enables the court to make such orders relating to the payment and management of the award for the benefit of the child as it thinks fit, including ordering the money to be paid to the Accountant of Court, or to a parent or guardian of the child, subject to conditions of the court’s choosing. For the avoidance of doubt, section 13 also encompasses an extra-judicial settlement made in the course of an action.2
5.8 Section 13 provides:
“Awards of damages to children
(1) Where in any court proceedings a sum of money becomes payable to, or for the benefit of, a child under the age of sixteen years, the court may make such order relating to the payment and management of the sum for the benefit of the child as it thinks fit.
(2) Without prejudice to the generality of subsection (1) above, the court may in an order under this section—
(a) appoint a judicial factor to invest, apply or otherwise deal with the money for the benefit of the child concerned;
(b) order the money to be paid—
(i) to the sheriff clerk or the Accountant of Court; or
(ii) to a parent or guardian of that child,
to be invested, applied or otherwise dealt with, under the directions of the court, for the benefit of that child; or
(c) order the money to be paid directly to that child.
(3) Where payment is made to a person in accordance with an order under this section, a receipt given by him shall be a sufficient discharge of the obligation to make the payment.”
Responses to the Discussion Paper
5.9 In our Discussion Paper we asked:
“23. Are there any problems at present with the operation of section 13? If so,
please describe them and give examples where possible.”
5.10 The majority of consultees, including a mixture of practitioners specialising in personal injury cases, insurers and trade unions, considered that there are no serious operational issues with section 13. The overall view was that on the face of things, section 13 operates satisfactorily and is generally fit for purpose.
5.11 However, a number of consultees did raise valid concerns. Criticisms and observations included (i) the lack of use of section 13, (ii) the difficulties faced by solicitors when making an application under section 13, as the application may be seen as challenging the instructing parent’s or guardian’s trustworthiness or capabilities, and (iii) the general lack of oversight of awards of damages made to children, which may leave the award open to ill-advised investment or misappropriation.
Discussion
(i) Lack of use
5.12 Despite section 13 being the key provision aimed at managing and safeguarding awards of damages to children, it is used infrequently.
5.13 The Accountant of Court plays an important role in the context of section 13. Section 13(2)(b)(i) provides that the court may make an order that an award of damages made to a child be paid to the Accountant of Court (or sheriff clerk). She will then take professional financial advice as to its management. On the basis of available records, the Accountant of Court has confirmed that during the 14 years from 2009 to 2023, there appear to have been few remits of damages awards to her. In practice, section 13 is used only where a case goes to proof, and that is rare as the vast majority of personal injury cases settle. If there has been no court involvement in the case, section 13 does not apply. Generally, courts do not refer to the Accountant of Court unless requested to do so by a party (a judge’s ex proprio motu3 referral is rare). The statistics are indicative of a lack of use of a key provision aimed at managing and safeguarding awards of damages to children.
5.14 The Law Society of Scotland advised that the reason for the low usage of section 13 is simply that its engagement is not compulsory, and it is rarely ever raised in a child’s damages claim by a party to the action. Kennedys Law suggested that the reason parties do not use section 13 more often is that a defender may not feel sufficiently informed about the circumstances of the parent or child to propose an order in the specific terms which section 13 requires. This sentiment was echoed by Clyde & Co and may go some way to explaining the low usage of the provisions. A further theory offered by Kennedys Law is that a parent or guardian may feel confident about managing the sum, and therefore they may consider it unnecessary to seek an order under section 13.
(ii) Challenges facing solicitors
5.15 Consultees explained the difficult position solicitors may find themselves in when making an application under section 13, as the application may be seen as challenging the instructing parent’s or guardian’s trustworthiness or capabilities. Making an application could be interpreted as implying either (a) the client’s inability to properly manage the child’s funds and/or (b) the client’s lack of integrity and potential misapplication of the funds. One consultee explained that:
“the critical issue with the system in Scotland at present is that it puts the pursuer’s solicitor in a position of conflict - the solicitor is required to go to court and say that they do not trust the person who is instructing them (the child’s parent) to look after the compensation.”4
5.16 We recognise how challenging it may be for a solicitor to make an application under section 13 in such circumstances. In order to address this issue, we consider that it would be beneficial to place a new responsibility on the judge to inquire into the future administration of an award, rather than rely on parties to raise section 13 in an action. We discuss this further in paragraphs 5.32-5.38 below.
(iii) General oversight of awards
5.17 Of most concern in relation to section 13 is the lack of oversight of awards of damages made to children, which leaves the award open to possible ill-advised investment or misappropriation. Naturally, we proceed on the hypothesis that parents and guardians do not deliberately set out to exhaust or misappropriate an award of damages made to a child. However, one ill-advised purchase or investment decision could dissipate the award unintentionally. Similarly, one decision to spend the award, or part of the award, in a way which is not entirely compatible with the best interests of the child could amount to misappropriation. We are aware that the majority of such cases will involve the innocent mismanagement of funds rather than purposeful misappropriation. Nevertheless, it is prudent to explore ways in which such an award may be more robustly safeguarded. We consider this in more detail in paragraphs 5.32-5.38 below.
5.18 We are aware that to some extent, the potential for ill-advised investment and/or misappropriation is mitigated by the use of Parental Indemnity forms which are sometimes imposed in extra-judicial settlements by an insurer, and set out that the payment is being made in full and final settlement of the claim, on the basis that an undertaking is given by the parent that they will apply the funds for the sole benefit of the child. However, the purpose of a Parental Indemnity form is to protect insurers' liability, rather than ensure the child's funds are spent appropriately. Consultees indicated that they are uncomfortable with this approach and would prefer increased court involvement in cases involving awards of damages made to children, or alternatively that the award should be paid into a trust to ensure it is safeguarded. It would appear that there is an appetite for general independent oversight of any award made to a child. We address reform of this nature in Recommendation 14.
Responses to Discussion Paper
5.19 In our Discussion Paper, we asked:
“24. If there are problems, how do you consider these might be resolved? Specifically, do you think the court should have regard to the same matters that it has to consider when determining an application under section 11(1) of the 1995 Act, or are there other or additional matters that the court should consider?”
5.20 Proposals from consultees to improve the law in this area focused on increased involvement from (i) the court and (ii) the Accountant of Court. There was no consensus amongst consultees in relation to what form the increased involvement might take; consultees who commented on how oversight of an award may be provided had mixed views. General observations included the proposal that there should be a court/judicial approval process where the damages are paid into the court, a trust, or a protected account to ensure that the award is used for the benefit of the child. There was also discussion about whether the court should only become involved where the applicant is unrepresented. Similar thinking was offered in relation to the Accountant of Court, who consultees suggested could provide an additional safeguard for awards made to children.
5.21 Against this background, we are persuaded that reform in this area would be of benefit to children and families. We are attracted to the proposition of an enhanced role for the court and the Accountant of Court in order to improve the safeguards which surround awards of damages made to children. We consider the exact nature of this enhanced role below in paragraphs 5.32 - 5.38.
5.22 The second part of Question 24 asked what matters the court should have regard to in cases involving section 13 and whether these should be the same as the matters considered in cases invoking section 11(1) of the Children (Scotland) Act 1995, namely (i) the welfare of the child, (ii) the “no order” principle5 and (iii) the views of the child (as set out in section 11(7)). The principles are commonly referred to as the three fundamental principles which inform many other decisions affecting children.
5.23 For background, section 11(1) of the Children (Scotland) Act 1995 allows for court orders to be made in relation to parental rights and responsibilities, guardianships or the administration of a child’s property. The court is given a general discretion to make “such orders relating to the payment and management of the sum for the benefit of the child as it thinks fit”. However, rules of court provide that where an order under section 13 has already been made, an application may be made for an order under section 11(1)(d) for administration of the child’s property, and the court must take into account the welfare of the child, the “no order principle” and the views of the child. The interaction between section 13 and section 11(1)(d) is discussed in a different context in paragraphs 5.66-5.73 below but, for present purposes, it is important to note that currently orders made under section 13 do not have to take into account the three fundamental principles, but orders made under section 11, do (due to section 11(7)).
Responses to Discussion Paper
5.24 Of the 13 consultees who provided a view, the majority supported or did not oppose this proposal. Clyde & Co summed up the position in their response, “it seems sensible to provide that the court has regard to the three fundamental principles which inform many other decisions affecting children.” The Senators of the College of Justice favoured the three principles being considered but were of the view that this should be left to the discretion of the court.
Discussion
5.25 In our view, there should be no difference in what the court considers in cases utilising section 13 or section 11. A change to this effect would make section 13 more inclusive of the modern way of managing cases involving children and ensure that the fundamental principles relating to children are enshrined in legislation. It is not the intention of this recommendation to encroach upon the discretion of the court. It is simply aimed at modernising the relevant legislation and bringing the pertinent matters to the forefront of the court’s mind.
5.26 Section 11(7) of the 1995 Act will in due course be repealed and replaced by new sections 11ZA and 11ZB of the 1995 Act inserted by section 1 of the Children (Scotland) Act 2020 which further expand on the matters the court must have regard to under these three principles when deciding whether or not to make an order under section 11. At the time of writing, sections 11ZA and 11ZB are not yet in force. We have based our draft Bill provision on section 11 of the 1995 Act which is currently in force. However, should section 1 of the 2020 Act6 be commenced, alternative wording for section 8 of the Bill might be: “Sections 11ZA and 11ZB apply in relation to subsection (1) as they apply in relation to section 11(1)”.
5.27 We therefore make the following recommendation:
(Draft Bill, section 7)
Background
5.28 Our Discussion Paper7 considered the wide discretionary power section 13 provides to the court. It asked:
“25. Do you consider that it should be mandatory for the parents and guardian to report to the Accountant of Court, especially where a child will be largely dependent upon an award of damages for the rest of their life? Or do you consider that the imposition of such a reporting requirement is a matter best left to the discretion of the court?”
Responses to Discussion Paper
5.29 Of the 21 consultees who responded to this question, ten consultees8 from a variety of backgrounds thought that the decision on reporting should be left to the discretion of the court. Clyde & Co were of the view that a mandatory report would be “too prescriptive, costly and unnecessary in the vast majority of cases.” Similarly, Digby Brown said that to impose a requirement would “involve unnecessary intervention in private family life.” Three consultees9 took the view that there should be an automatic report made to the Accountant of Court or the Court of Protection regardless of circumstances. Eight consultees10 had more nuanced views on this question in the sense that they were supportive of the proposition that a mandatory report should be made to the Accountant of Court, but only under certain circumstances. These circumstances include the value of the award, whether the child is represented or not, and to whom the responsibility for providing a report to the Accountant of Court falls.
5.30 No consultee made a suggestion as to the level of award at which mandatory reporting to the Accountant of Court should be set. Generally, it was believed that for lower value awards a mandatory reporting requirement would be unnecessary. The Forum of Scottish Claims Managers explained that, although they agree that it should be mandatory in cases where a child will be largely dependent upon an award for the rest of their life, for lower value claims this would be disproportionate. This opinion was shared by NFU Mutual who took the view that a mandatory requirement would be “wholly disproportionate and unnecessary in lower value claims.”
Discussion
5.31 We are not convinced that a mandatory reporting requirement for parents and guardians is the correct way forward. In some cases, it would be considered intrusive and disproportionate. We are also mindful of the resource implications for the Accountant of Court should each case in which an award of damages was made to a child be presented to the Accountant of Court. An alternative to a mandatory reporting requirement for parents and guardians is to place an additional duty on the court as we recommend below in paragraphs 5.32-5.38. We consider that the advantage in taking this approach is that in cases where a judge thinks it is necessary, having been informed of how the pursuer’s agents (and by association, parents or guardians) intend to safeguard the award and considering the relevant factors outlined above, those cases will receive the oversight they require. For other cases, in which the judge is satisfied that suitable arrangements are in place to safeguard the award, no further involvement from the court or Accountant of Court will be necessary. The key point is that there is a much improved and enhanced check and balance on the safeguarding of the award firstly by the court, and secondly, with the potential for the involvement of the Accountant of Court in cases where the court deems it necessary (see recommendation 14 below).
Background
5.32 In our Discussion Paper we asked:
“26. (a) Do you consider that a court should have a duty, when about to grant
decree in a claim for damages for a child, to make inquiries about the future administration of any funds and property to be held for the child, and, if the court considers it necessary, to remit the case to the Accountant of Court for a report in terms of section 13?
(b) If so, should such a duty be expressed in a Practice Note/Direction; in a Rule of Court; or in some other way?”
Responses to Discussion Paper
5.33 Responses to this question were generally mixed, with a small majority tipping the scales in favour of an affirmative response. Of note was the response from the Senators of the College of Justice who responded to this question as follows:
“yes, we agree that there is nothing controversial, and indeed merit, in the court being obliged, prior to granting decree to inquire into the future administration of the child’s damages and, if it is considered necessary, to remit the case to the Accountant of Court for a report, in terms of s.13, for advice.”
5.34 The Senators were of the view that there should be no mandatory requirement to remit to the Accountant of Court, but they did support the proposal that the court should be obliged to inquire into the administration of the award and have the option of remitting to the Accountant of Court. Of course, the option to remit to the Accountant of Court already exists; however, the obligation to inquire into the administration of the award will bring this to the forefront of the court’s and practitioners’ minds.
5.35 Six consultees 11took the opposing view that there should be no such obligation placed on the court. A variety of reasons were offered as justification for this viewpoint, such as proportionality; the delay in payment of the damages which may result from having to take the additional step; the fact that some cases are settled extra-judicially and therefore such a step may be pointless and result in extra costs for parties; as well as the additional resourcing burden it would place on both the Accountant of Court and the Scottish Courts and Tribunals Service. We are grateful to the consultees who provided this perspective.
Discussion
5.36 We consider that it would be beneficial to place a new responsibility on the judge to inquire into the future administration of an award, and for pursuers’ agents to be required to explain to the court (by way of a form) how the award will be safeguarded. Taking into account this information and other relevant factors, such as the level of damages awarded, the future care and accommodation needs of the child, and any proposed trust deed, the court will have to decide whether to remit the case to the Accountant of Court for advice on how the award should be managed, or, if the court decides this is not necessary, the court must explain in a written report why that is the case.
5.37 By providing this type of supervision in all cases, the court will act as a safeguard when an award of damages is made to a child. The court’s inquiry into the future administration of the award will encourage parties to plan appropriately in regard to how the award will be used in the best interests of the child and explain this to the court. Section 3 of the Damages (Investment Returns and Periodical Payments) (Scotland) Act 2019 (which is not yet in force and is discussed above in paragraphs 3.132-3.133) may provide the court with an alternative to awarding a lump sum and this is something which pursuers’ agents may wish to provide views on. Thereafter, the court will have the discretion to refer the case to the Accountant of Court for advice on how the award should be managed. It is our hope that this approach will provide clear guidance to the court and ensure that there is some element of consistency of practice for parents and their advisers.
5.38 We therefore make the following recommendation:
14. Section 13 of the Children (Scotland) Act 1995 should be amended to impose a duty on the court, prior to granting decree for damages for a child, to inquire into the future administration of the award and, if the court considers it necessary, to remit the case to the Accountant of Court. The pursuer’s agent should be required to submit a form to the court,12 outlining how the funds are to be invested and protected until the child reaches the age of 16. A non-exhaustive list of factors which the court should take into consideration should be contained in the form including (i) the level of damages awarded, (ii) the future care and accommodation needs of the child and (iii) whether the sum is to be placed in a trust and if so, the identity and qualifications of the trustees, together with a copy of the proposed trust deed. If the court does not remit the case to the
Accountant of Court, the judge or sheriff should have a duty to explain, in a written report, why this is not necessary. The duty would apply whether damages are assessed and awarded by the court, or whether damages are to be paid as a result of settlement arrangements where a court is invited to interpone authority to a joint minute and grant decree in terms thereof.13 The duty would not apply to interim awards of damages.
(Draft Bill, section 6)
Background
5.39 As discussed in paragraphs 5.28 - 5.31, section 13 of the Children (Scotland) Act 1995 provides the court with a wide discretionary power which includes the power to order an award of damages to be paid directly to a child. It strikes us that this scenario will rarely occur in practice and will only be appropriate in relation to smaller damages awards.
Responses to Discussion Paper
5.40 In our Discussion Paper we asked the following questions:
“27. Where the court orders an award of damages to be paid directly to the child, do you consider that the wide discretion afforded to the court remains appropriate, or ought this discretion be curtailed by requiring the court to consider factors such as the amount of the award and the capacity of the child?
28. If you consider that the court ought to be required to take account of specific factors, are there any other factors, other than the amount of the award and the capacity of the child, that the court ought to have regard to?”
5.41 Of the 15 consultees who responded to Question 27, ten14 generally considered that the court’s wide discretion remains appropriate. The Forum of Insurance Lawyers stated, “we anticipate that the court takes into consideration the factors mentioned above.” Likewise, the Society of Solicitor Advocates said, “we consider that the court would likely have cognisance to the factors described before making such an award.”
5.42 Three consultees15 considered that in certain circumstances, the court should be required to consider specific factors. Such factors may include the age and needs of the child; the size of the award; the best interests, welfare and views of the child; the likely reliance on the award into adulthood; whether the child will have capacity at age 16; and whether the child’s parents or guardians have the ability to assist the child to manage the award effectively.
5.43 Two consultees took a different view. Zurich Insurance felt strongly that the court’s wide discretion is no longer appropriate and should be curtailed unless the payment is going into a trust. The Association of Personal Injury Lawyers believe that all awards, regardless of circumstances, should be held by the Accountant of Court until the child reaches 16.
5.44 In relation to Question 28, eight consultees offered suggestions as to additional factors the court ought to be required to take account of. These included the future costs of caring for the child, the best interests of the child, the welfare of the child, the views of the child, the legal capacity of the child on reaching the age of 16, the ability of a parent or guardian to assist the child in managing sums effectively, the extent to which the child is likely to remain dependent on the award upon reaching adulthood, and any specific immediate needs of the child.
Discussion
5.45 We are of the view that it is unlikely, in the vast majority of cases, that the court would order that an award of damages be paid directly to a child. Should the court choose to do so, we trust that there are valid and well considered reasons for such an approach. We note that only a small number of consultees suggested curtailing the court’s discretion in this context.
5.46 Although we recognise the merit of each of the suggestions in response to Question 28, we do not believe that there is any requirement to specify additional factors which the court must take into account when making an award directly to a child. We therefore make no additional recommendation beyond that made in Recommendation 13: that the court must take into account the three fundamental principles when making an order under section 13, including an order that directs that damages be paid directly to a child.16
Background
5.47 As stated in paragraph 5.6 above we recommend that a standalone project on damages awarded to children and trusts is undertaken. Nevertheless, the research, consultee responses and outline recommendations in this Report may form a useful basis for such a project.
5.48 One method of safeguarding an award of damages made to a child is to set up a trust. Generally, this might be a personal injury trust, although this is not always the case, and it may be possible to use other types of trust. 17Our Discussion Paper considers the benefits of attempting to safeguard an award of damages made to a child using a trust. It also considers some of the challenges, such as who has the authority to place a child’s award into a trust on the child’s behalf. 18Question 29 of the Discussion Paper asks:
“29. (a) Do you consider that section 13 allows the court to direct payment of
damages into a trust?
(b) If so, do you consider that such payments may be made into a bare trust or a substantive trust or both?
(c) Do you have any examples? Can you give details?
(d) Do you consider that section 13 should permit transfer to persons other than those listed in section 13(2)(a) and (b)? If so, to whom?
(e) To what extent do you consider that a court is able to define the purpose of such a trust, and the powers of the trustees, in particular in the context of directions or restrictions concerning the beneficiaries or the residue of the trust estate?
(f) Do you consider that there is a need for reform? If so, what needs to be reformed, and do you have any solutions to suggest?”
Responses to Discussion Paper
5.49 Ten consultees 19responded to this question. Some consultees responded to each part of the question (a)-(f), whilst some consultees only provided an answer to certain parts. We are grateful to consultees for their in-depth and thoughtful responses to this question. It is undoubtedly a complex area of law which requires thorough examination and clarification.
(a) Do you consider that section 13 allows the court to direct payment of damages into a trust?
5.50 Ten consultees20 responded to part (a) of Question 29. There was little consensus as to whether the court has power to direct payment into a trust and if so, which type of trust. The majority believed that section 13 gives the court the power to direct money into a trust. 21A minority took an alternative view or chose to make a general comment about awards of damages for children being placed into a trust.22 Four consultees 23took the opportunity to ask for clarity to be provided in this area of law. The Senators of the College of Justice said:
“... that the paper identifies doubts on the matter of whether the general discretion afforded by section 13 is such as to confer on the court the power to direct payment of damages into a trust - whether a bare trust or a substantive trust - is sufficient to indicate that clarification is necessary, and that any such clarification, which should specify the extent of any power to direct payment of damages into a trust arrangement, should be effected by statute. The extent to which the Court should have power to direct payment of damages into a trust will necessarily be informed by the terms and effect of Article 1 of the First Protocol to the ECHR.24
For our part, we share the concern that a substantive trust, involving a direction as to the identification of the person or persons who are to be beneficiaries of the residue of the trust, or which otherwise might benefit different beneficiaries, other than the child awarded damages, may not be appropriate in A1P1 terms.”
5.51 It is clear that there is a need for clarity relating to the court’s powers under section 13 to direct an award of damages into a trust.
(b) If so, do you consider that such payments may be made into a bare trust or a substantive trust or both?
5.52 Consultees had mixed views. Ten consultees responded: three consultees 25advised caution against using the power to place an award into a substantive trust for Article 1 Protocol 1 European Convention on Human Rights reasons, three consultees26 explained that there is no clear answer to this question or that they are unsure of the answer, and four consultees27 said that the power related to both types of trust.
(c) Do you have any examples? Can you give details?
5.53 Only two consultees28 shared an example of the use of a trust in practice. It is difficult to say whether this is because it is a rare occurrence or because consultees did not want to share their experiences in this way. Unite the Union and Thompsons Solicitors provided identical examples:
“we represented a child injured in an RTA who even though she was under 16 she would not be deemed to have capacity when she reached the age of 16 due to her injuries. Her damages were placed into a Personal Injury Trust with a professional trustee. She was in receipt of means tested benefits that we were keen to ensure would continue beyond settlement hence the use of the PI trust.”
(d) Do you consider that section 13 should permit transfer to persons other than those listed in section 13(2)(a) and (b)? If so, to whom?
5.54 In terms of the transfer of the award to persons other than those listed in section 13(2)(a) and (b),29 three consultees30 were of the view that “professional trustees” or “trustees” should be included in the list. Four consultees 31thought that the scope of the list was appropriate and required no changes. One of the four consultees 32made the case for removal of the option of the judicial factor due to costs and bureaucracy.
(e) To what extent do you consider that a court is able to define the purpose of such a trust, and the powers of the trustees, in particular in the context of directions or restrictions concerning the beneficiaries or the residue of the trust estate?
5.55 Five consultees 33responded to Question 29(e) which relates to whether the court is able to define the purposes of the trust and the trustees’ powers. Responses ranged from yes, the court already has this power,34 to responses focused more on the duties of professional trustees. Two consultees35 said that in cases involving professional trustees, a trustee’s professional duty to the beneficiary ought to supersede judicial control. One consultee 36was of the view that it was up to the court to define the purpose of the trust, but “the remaining matters go beyond the scope of the court’s role and would be more appropriately dealt with by the professional advisor.” One consultee 37offered an alternative solution and suggested that “the trustees’ powers should be similar to those which apply when a Financial Guardianship is appointed.”
(f) Do you consider that there is a need for reform? If so, what needs to be reformed, and do you have any solutions to suggest?
5.56 Six consultees38 offered suggestions for reform. The majority of suggestions (four out of the six responses)39 centred upon clarity relating to the court’s discretion to direct payment of damages into trusts - specifically substantive trusts. Other suggestions included (i) that the court should not be given the power to impose a requirement to set up a substantive or personal injury trust,40and (ii) that in cases where the child will never have capacity, the funds should be looked after by an independent trustee who will only pay out for the benefit of the child and not, for example, to meet the parents’ needs. 41Finally, Digby Brown suggested that it would be helpful if the monetary limits set by section 9(2) of the 1995 Act were removed, thus giving greater flexibility to applications concerning a child’s property held in a trust. This suggestion is considered in more detail in paragraphs 5.109-5.116.
Discussion
5.57 As there appear to be significantly different views about the power of the court to direct payment of damages into a trust, the type of trust which may be appropriate, the choice of trust purposes, and whether there should be any independent supervision of a trust, we recommend that there should be a standalone Commission project, with trust specialist input, entitled “Personal Injuries, Children, and Trusts”. We acknowledge that taking this approach will not provide immediate clarification for practitioners on this area of law. However, given the variety of evidence provided in response to the Discussion Paper, and in particular, the uncertainty in regard to the current law, we are of the opinion that this is the most sensible way forward. Undertaking a standalone project will allow for more detailed and specialist evidence to be gathered on the aforementioned issues, and ultimately ensure that the Commission is able to make an informed decision when clarifying or recommending possible reform in this area.
5.58 We therefore recommend that:
15. There should be a standalone Commission project, with trust specialist input, entitled “Personal Injuries, Children, and Trusts”, focusing amongst other things on (i) whether section 13 of the Children (Scotland) Act 1995 empowers the court to order payment of a child’s damages into a trust; (ii) if so, whether the trust could be a bare trust, or a substantive trust, or a Personal Injury Trust; (iii) to what extent the court is able to define the purpose(s) of such a trust; (iv) what happens where a court or the Accountant of Court has some continuing supervision in respect of funds held in a trust, and a difference of view arises between the trustees and the court/Accountant of Court; and finally (v) whether there should be independent oversight of an award of damages for a child which is to be placed into trust, and if so, what form that oversight should take and whether such oversight should be necessary in all cases or only in certain specific circumstances.
Background
5.59 Section 13(2)(b)(i) of the Children (Scotland) Act 1995 provides the power for the court to make an order that money (including an award of damages made to a child) be consigned to the sheriff clerk. According to data provided by the Scottish Courts and Tribunal Service for the calendar years 2014 to 2020, no funds were consigned with any sheriff clerk under an order of the court in terms of section 13(2)(b)(i).
Responses to Discussion Paper
5.60 In our Discussion Paper we asked:
“30. Do you agree that the power to make an order that money be paid to the sheriff
clerk should be retained meantime?”
5.61 Sixteen consultees responded to this question, 1442 of whom were supportive of retaining the power. The justification for this view, provided by six consultees43, was the possibility that the formation of the All-Scotland Personal Injury Court (“ASPIC”) in 2015 may result in the option of money being paid to the sheriff clerk being utilised more often. All six consultees who mentioned ASPIC agreed that the court has not existed for long enough to allow for accurate assessment of how ASPIC cases may impact the power in due course. Unite the Union summarised matters as follows:
“we agree that the recent formation of ASPIC is reason enough to retain the power to make an order that money be paid to the Sheriff Clerk. There has not been enough time for proper consideration to be given to the use of this function given the relatively short time this Court has been in existence.”
5.62 Discussion
5.63 We agree with this view and conclude that there should be no change to section 13(2)(b)(i) of the Children (Scotland) Act 1995 at this time. This matter should be revisited once the full impact of ASPIC can be assessed.
Background
5.64 In our Discussion Paper we asked:
“31. Do you consider that any other reform is necessary in this context? If so, what?”
5.65 Thirteen consultees44 responded to this question. Twelve45 of the thirteen stated that they had no comment or other proposals for reform in this area. One consultee46 proposed an additional reform and referred us to their detailed response to the opening question of the chapter, which asked consultees if there were any problems in practice with the operation of section 13. To summarise his response, he is of the view that the value of the award should dictate the course the case follows. He splits cases into three types. For cases under £10,000, he suggests limited input from the court. Payment can be made to the parent or guardian relatively safely, with a reminder of relevant duties. For cases between £10,000-£50,000, the sums should be consigned to the sheriff clerk. For cases above £50,000, it is assumed that most agents will make arrangements for financial advice, or a Case Manager may be appointed. His concern focuses on the potential that a parent or guardian may still dissipate or misappropriate funds in some way. The general solution proposed is that the Office of the Public Guardian or the Accountant of Court may play a role in this case. The suggestion is that a register is created in addition to a supervision and reporting requirement. Moreover, there would be an opportunity for concerned individuals to report concerns for investigation even if they had no title and interest to sue.
Discussion
5.66 As it is our recommendation to legislate to provide enhanced oversight of an award by both the court and the Accountant of Court, we believe that the individual’s concerns are addressed by our previous recommendations. We are not minded to adopt the suggested categorisation of cases by value, as we consider that flexibility, together with the judgement of the court or the Accountant of Court, is more effective for the protection of children. The reform which we are recommending, which is set out in paragraphs 5.32-5.38 above, will result in greater oversight by the court and the Accountant of Court. We do not recommend categorisation of awards by size nor the creation of a register. Provided that there is greater oversight by the court/Accountant of Court, we consider that there is likely to be an obvious “port of call” for a concerned individual.
Background
5.67 As noted in our Discussion Paper,47 some concern has been expressed regarding the fact that the wide discretionary power of the court in section 13(1) is only triggered where, in any court proceedings, a sum “becomes payable to, or for the benefit of” a child. This means that once damages have been paid, section 13 no longer applies and cannot be utilised by parties. 48The alternative then is to use section 11, which effectively fills the gap left by section 13 in relation to damages which have already been paid.
5.68 Where there are existing proceedings, an application under section 11(1)(d) of the Children (Scotland) 1995 Act may be made by minute. Upon receiving an application, the court may make such order as it sees fit, including appointing a judicial factor to manage a child’s property, or remitting the matter to the Accountant of Court to report on suitable arrangements for the future management of the property.49
5.69 Section 11 also allows an application under section 11(1)(d) in relation to the administration of a child’s property in “relevant circumstances”, whether or not those proceedings are independent of any other action. The “relevant circumstances” are listed in section 11(3) and include where an application is made by a person who has parental rights and responsibilities, or by a person who does not have parental rights and responsibilities but otherwise claims an interest in the child.50
Responses to Discussion Paper
5.70 In our Discussion Paper we asked:
“32. Do you consider that there is adequate provision to enable application to be
made in court proceedings for an appropriate order relating to the management of sums already paid in respect of damages awarded to a child? If not, please give reasons or examples.”
5.71 We took the preliminary view that there is adequate provision in section 11 to enable an application to be made in court proceedings for an appropriate order relating to the management of sums already paid (as opposed to payable) in respect of damages awarded to a child.
5.72 The majority of consultees - 14 out of 17 51- said that there is adequate provision to enable applications to be made for an appropriate order for the management of damages that have already been paid to a child or their parent or guardian. Of those who provided reasoning for their views, section 11 was identified as the key provision which supports section 13 in such cases. Thompsons Solicitors said, “we consider that section 11 provides adequate opportunity to allow an application to be made during court proceedings for an appropriate order relating to the management of sums.” Similarly, Digby Brown stated, “yes, we do consider that there is adequate provision on the basis of the powers provided in s.11 of the 1995 Act.”
5.73 A minority - three52 out of 17 - suggested that section 11 might be inadequate. One consultee 53discussed issues arising from the fact that, at present, the process relies on solicitors expressing concerns about the ability of parents or guardians to manage funds. This issue is discussed in paragraphs 5.15-5.16 above but may be less relevant in the context of section 11, where an application can only be made in certain circumstances. The two other consultees advocated increased involvement from the Accountant of Court in all cases.54
Discussion
5.74 It appears that section 11 adequately fills any gap left by section 13 once damages have been paid. Parties can still access the court using section 11(1)(d). We are therefore not concerned that there is any scenario (apart from in cases which settle out of court) in which parties cannot access the court when an order is made for damages awarded to a child. We also consider that Recommendation 14 (suggesting the insertion of certain subsections into section 13) provides additional protection for the child, as agents will have to be proactive in safeguarding the award and a judge must inquire into the management of the award in a way which is not currently the case. It is hoped that this approach will encourage sensible forward planning for an award of damages made to a child so fewer cases will have to come to court once damages have already been paid.
See Discussion Paper pages 55-73.
McEwan and Paton on Damages, para 8-18, fn 2.
Ex proprio motu is a Latin term to describe something a judge does on their own initiative, without an application from the parties.
The Association of Personal Injury Lawyers.
“The no order principle” being, as its name suggests, that the court should not make an order or orders unless it considers that doing so would be better for the child than making no order at all.
Inserting new sections 11ZA and 11ZB.
See paragraphs 5.12-5.22 of the Discussion Paper.
Clyde & Co, University of Aberdeen, Senators of the College of Justice, Digby Brown, Drummond Miller, DAC Beachcroft, Society of Solicitor Advocates, Association of British Insurers, Direct Line Group, Law Society of Scotland.
Zurich Insurance, Unite the Union, Thompsons.
Association of Personal Injury Lawyers, Ronald Conway, Stagecoach, Forum of Insurance Lawyers, Aviva, Forum of Scottish Claims Managers, NFU Mutual, Kennedys Law.
Clyde & Co, Forum of Insurance Lawyers, Digby Brown, DAC Beachcroft, Association of British Insurers, Law Society of Scotland.
The Scottish Civil Justice Council (‘SCJC’) is responsible for preparing draft rules of procedure for the civil courts. It is anticipated that the form which pursuers’ agents will be required to submit will be developed by the Personal Injury Committee of the SCJC.
Interpone authority to a joint minute means that the court has seen and approved of the parties’ agreement as contained in the joint minute.
Senators of the College of Justice, Digby Brown, University of Aberdeen, Society of Solicitor Advocates, Direct Line Group, NFU Mutual, Law Society of Scotland, Ronald Conway, Clyde & Co, Forum of Insurance Lawyers,.
Thompsons, Kennedys, Drummond Miller.
See Question 38 at paragraph 5.99.
See paragraphs 5.47-5.52 of the Discussion Paper.
Zurich, Unite the Union, Digby Brown, Thompsons, Drummond Miller, Kennedys Law, Senators of the College of Justice, Association of Personal Injury Lawyers, Law Society of Scotland, Association of British Insurers.
Zurich, Unite the Union, Digby Brown, Thompsons, Drummond Miller, Kennedys Law, Senators of the College of Justice, Association of Personal Injury Lawyers, Law Society of Scotland, University of Aberdeen.
Zurich, Unite the Union, Digby Brown, Thompsons, Drummond Miller, Kennedys Law.
Senators of the College of Justice, Association of Personal Injury Lawyers, Law Society of Scotland.
Association of Personal Injury Lawyers, Drummond Miller, Association of British Insurers, Kennedys Law.
Article 1 of Protocol 1 of the European Convention of Human Rights precludes the state from interfering with a person’s property except in limited circumstances.
Kennedys Law, Senators of the College of Justice, University of Aberdeen.
Zurich Insurance, Law Society of Scotland, Association of British Insurers.
Unite the Union, Thompsons, Drummond Miller, Digby Brown.
Unite the Union and Thompsons.
i.e. a judicial factor, a sheriff clerk, the Accountant of Court, or a parent or guardian of the child.
Drummond Miller, Unite the Union, Thompsons.
Senators of the College of Justice, Law Society of Scotland, Digby Brown, Zurich Insurance.
Drummond Miller, Digby Brown, Law Society of Scotland, Unite the Union, Thompsons.
Zurich Insurance, Drummond Miller, Law Society of Scotland, Senators of the College of Justice, Kennedys Law, Association of British Insurers.
Kennedys Law, Senators of the College of Justice, Association of British Insurers, Drummond Miller.
Zurich Insurance, Forum of Insurance Lawyers, University of Aberdeen, Unite the Union, Senators of the College of Justice, Digby Brown, Thompsons, Drummond Miller, Association of British Insurers, Society of Solicitor Advocates, Direct Line Group, NFU Mutual, Kennedys, Law Society of Scotland.
University of Aberdeen, Unite the Union, Senators of the College of Justice, Digby Brown, Thompsons, NFU Mutual.
Clyde & Co, Forum of Insurance Lawyers, Senators of the College of Justice, University of Aberdeen, Digby Brown, Drummond Miller, DAC Beachcroft, Association of British Insurers, Direct Line Group, NFU Mutual, Kennedys Law, Law Society of Scotland, Ronald E Conway.
Clyde & Co, Forum of Insurance Lawyers, Senators of the College of Justice, University of Aberdeen, Digby Brown, Drummond Miller, DAC Beachcroft, Association of British Insurers, Direct Line Group, NFU Mutual, Kennedys Law, Law Society of Scotland.
See paragraphs 5.30-5.33 of the Discussion Paper.
See Lord Brodie’s comments in S v Argyll and Clyde & Co Acute Hospitals NHS Trust 2009 SLT 1016 at para 6: “it seemed to me that counsel was correct when he accepted that ‘the horse had bolted’”.
Clyde & Co, Forum of Insurance Lawyers, University of Aberdeen, Unite the Union, Digby Brown, Thompsons, Drummond Miller, DAC Beachcroft, Association of British Insurers, Society of Solicitor Advocates, Direct Line Group, NFU Mutual, Kennedys Law, Law Society of Scotland.
Zurich Insurance, Association of Personal Injury Lawyers, Ronald E Conway.
Association of Personal Injury Lawyers.
Zurich Insurance, Ronald E Conway.