Changes to Part 21 (Approval and Management of Settlements etc. for Children and Protected Parties)

Articles

25/05/2023

With effect from 6 April 2023, Practice Direction 21 was revoked and Part 21 was amended to incorporate some of the provisions previously in PD21 (as well as some other changes).

Practitioners will be familiar with this section of the Civil Procedure Rules, which concern children (persons under 18) and protected parties (persons who lack capacity to conduct litigation).

Litigation Friends

Every protected party must have a litigation friend to conduct proceedings on her behalf: r.21.2(1). Every child must have a litigation friend unless the court permits her to conduct proceedings without one: r.21.2(2), (3) and (4). Where a litigation friend is required, no person may take a step in proceedings (save for issuing, serving or applying for a litigation friend) until there is one: r.21.3(2). A person may become a litigation friend by way of certificate of suitability or court appointment: r.21.5 and r.21.6.

Approval

Rule 21.10 provides that no “settlement, compromise or payment” (thus including any interim payment) in a claim by/behalf or against a child or protected party is valid without approval by the court. Accordingly, the court’s approval must be sought by way of application where (for example) the litigation friend and an opposing party have reached an agreement to settle a claim. Previously, the applicable procedure was found spread across the rules in Part 21 and PD21. The recent amendment amalgamated all of the relevant provisions into Part 21.

Proceedings brought for the sole purpose of obtaining approval must be made using the Part 8 procedure: r.21.10(2)(b). The application must be supported by a draft consent order, details of to what extent liability is admitted, the age and occupation of the child or protected party, confirmation that the litigation friend approves the settlement, a copy of any medical, financial or other expert evidence or advice, details (in a personal injury claim) of the accident and claimed loss and damage, documents relevant to liability and “a legal opinion on the merits of the settlement, except in very clear cases, together with any relevant instructions unless they are sufficiently set out in the opinion”: r.21.10(3). The draft order must be in Form N292 with appropriate amendments.

In almost all cases (even those which may be described as “very clear”), the court will be assisted by advice from a barrister who is specialist in the relevant area of practice. The advice will set out the facts and details of the agreement, analyse the claim and the range of reasonable settlements, and provide an opinion (including in light of, for example, risks on liability) on whether the settlement is reasonably capable of approval. The decision remains the court’s; but, for reasons of practicality, often connected to the weight of business before the judge in the list, the advice will form important guidance as to the likely outcome of the application.

Investment and Management of Funds

The default rule is that settlement monies will be paid into the court special account on an application by the litigation friend: r.21.11(7). Money in the special account will be paid out when a child turns 18: r.21.11(8)(b). The application for investment directions will be on Form CFO320 for a child or Form CFO320PB for a protected party: r.21.11(6).

Money for the benefit of a child (who is not a protected beneficiary) may be paid directly to the litigation friend to be placed into an account for the child’s use, per r.21.11(8)(a), but: (i) the court will be slow to permit money intended to be retained until the child turns 18 to be used prior to that date; and (ii) the previous attraction of payments into personal accounts, namely the higher rate of interest, has been reduced by the recent recovery in the rate of interest applied to funds in the special account (4.25% at the time of writing). In a case involving a very significant sum of money, the court will expect an applicant seeking the funds to be paid into a bespoke account or trust to provide extensive detail as to the terms of investment and the use to which the money will (or may) be put. A copy of the terms of the trust will be scrutinised. In many cases, particularly given the (now better) interest rate and the facility to apply in writing for ‘payments out’ under r.21.11(10), the special account may well be adequate as an investment vehicle.

Appointment of a Deputy

A significant change in the new version of Part 21 is to the threshold above which the court must direct a protected party’s litigation friend to apply to the Court of Protection for the appointment of a deputy for management of the fund. Prior to 6 April 2023, it was £50,000; that has now been raised to £100,000, with the intention of removing more cases from the (potentially lengthy and costly) Court of Protection procedure. There remain exceptions, set out in r.21.11(9), and the Court of Protection may permit the sum (even exceeding £100,000) to be retained in court and invested in the same way as a child’s fund can be: r.21.11(9)(e).

Recovery of the Litigation Friend’s Costs and Expenses

The old rules about what costs and expenses a litigation friend may recover from the child or protected party’s settlement have been moved from PD21 into r.21.12.

Such expenses, according to r.21.12(1)(a) and (b), must have been reasonably incurred and reasonable in amount; and in assessing such reasonableness the court will consider all the circumstances of the case, including the usual factors in r.44.4(3), premised on the facts and circumstances as they reasonably appeared to the litigation friend: r.21.12(5) and (6). Any costs must be in line with the provisions in Part 46 and PD46 which would otherwise apply to the action.

Expenses may include an insurance premium and interest on a loan taken out to pay a premium or another disbursement: r.21.12(3). The detailed (mandatory) requirements for evidence in support of an application are now in r.21.12(10). The litigation friend must file a witness statement setting out: the nature and amount of expenses; a copy of the CFA/DBA, supporting risk assessment and reasons for selecting that basis of funding (including advice given about it); a bill or costs breakdown from the solicitor; details of costs (agreed, recovered or fixed) recoverable by the claimant; and an explanation of the amount agreed/awarded for general damages for pain, suffering and loss of amenity and for past financial loss (accounting for sums recoverable by the Compensation Recovery Unit). The exacting detail specified in the list indicates that a court may be slow to permit recovery of expenses where there has been no or partial compliance.

In recent years there has been some discussion (and reference to first instance decisions with differing outcomes) about the recoverability of ATE premiums in cases where the facts or liability appeared clear-cut. The reality is that in almost every claim where there is no existing litigation insurance it is likely to be appropriate for a litigation friend to take out insurance to cover the risk of, for example, an early Part 36 offer which cannot be evaluated before the expert or other evidence is complete. A litigation friend would be on uncertain ground if she were to purport to accept an offer to avoid adverse costs consequences where (because some evidence is outstanding) there were no guarantee of subsequent approval by the court.

Featured Counsel

William Dean

Call 2011

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