Beattie v Secretary of State for Social Security
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PILL |
| Judgment Date | 09 April 2001 |
| Neutral Citation | [2001] EWCA Civ 498 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A1/2000/0334 |
| Date | 09 April 2001 |
[2001] EWCA Civ 498
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
APPEAL FROM A DECISION OF SOCIAL
SECURITY COMMISSIONER HOWELL DATED 9
SEPTEMBER 1999
Royal Courts of Justice
Strand, London, WC2A 2LL
The President
Lord Justice Pill and
Lord Justice Jonathan Parker
Case No: A1/2000/0334
William Braithwaite QC and Louis Browne (instructed by Messrs Meloy Whittle Robinson) appeared for the Appellant
Nathalie Lieven (instructed by the Solicitor to the Department of Social Security) appeared for the Respondent
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 £5,382.48p 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 £10,065.36p at the end of each three years with a minimum of 6 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...
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