Personal injury damages must be disregarded in means testing article banner image

The England and Wales High Court has ruled that a local authority was acting unlawfully in deciding that an individual’s access to a large personal injury compensation fund required her to pay the full cost of her community care services.

The claimant in the case (ZYM v Walsall ([2014] EWHC 1918 Admin)), referred to as ZYN, is severely disabled and has a need for community care services.  ZYN’s substantial capital assets derive from compensation paid in settlement of a personal injury claim.

It is, and it has been for many years, government policy that social care services are means tested and that people who have capital and savings over the threshold, which is currently £23,250, are required to pay the full cost of their residential care.  If the capital and savings are between £23,250 and £14,250 then it is assessed to show an assumed (or ‘tarriff’) income and the individual must contribute to the cost of the services.  Capital of £14,250 or less is fully disregarded for local authority residential care charging purposes.  There are exceptions to this general charging policy, one of which relates to capital derived from a personal injury settlement that is managed by a Deputy appointed by the Court of Protection.

It is common ground that the capital derived from ZYN’s personal injury settlement falls within the exemption.  However, the local authority in this case sought to charge ZYN for the full cost of the social care services received from them, on the basis that a significant part of the capital funds did not come within paragraph 44 of Schedule 10 to the Income Support (General) Regulations 1987, which disregards funds administered by the Court of Protection or which can only be disposed of by its order or direction.  In addition, the local authority asserted that paragraph 44(1)(a) referred to the old pre-Mental Capacity Act 2005 Court of Protection which appointed receivers, rather that the Court of Protection as it is currently constituted which appoints Deputies.

As is usual in personal injury cases, the Order from the Court of Protection regarding ZYN’s personal injury settlement expressly appointed ZYN’s Deputy and gave the Deputy general authority to take possession or control of the property and affairs of ZYN and to exercise the same powers of management and investment as ZYN as beneficial owner, subject to the terms of the Order.  Notably for the case, a paragraph of ZYN’s Order authorises the Deputy to withdraw a sum not exceeding £50,000 a year from ZYN’s personal injury compensation for ZYN’s use and benefit without needing to obtain the prior approval of the Court of Protection.  The local authority maintained that this annual sum should not be disregarded when calculating contributions towards ZYN’s care.

ZYN maintained that under the relevant legislation the local authority is required to disregard capital available to the Deputy because it is part of the personal injury settlement, regardless of the access and discretion that the Deputy had relating to the released funds.

The case set out the legal framework for charging for community care services and examined in detail the construction and interpretation of the relevant statue.  Rules of statutory interpretation indicate that words should have the meaning relevant to the time at which a particular provision was applied and Mr Justice Leggatt said that to interpret the regulations in any other way would produce an absurd result.  He went on to state that the Court of Protection referred to in the regulations was the current Court that is in existence and has statutory responsibility for administering the property and affairs of persons lacking capacity at the relevant date when the rules were applied.

Mr Justice Leggatt stated that the Order made by the Court of Protection in ZYN’s case does not give the Deputy an unfettered discretion as to how the sum of up to £50,000 a year may be spent.  He noted that the Order expressly requires the Deputy to apply the general best interest principles set out in section 1 of the Mental Capacity Act 2005 and to have regard to the guidance in the Code of Practice to that Act.

The conclusion made in the case was that the whole of the capital of ZYN was interpreted as falling within the disregard’s scope, even after the Order had been made which permitted the Deputy to withdraw a sum of money either for a particular purpose or for the general use and benefit of ZYN.  Thus ZYN’s funds administered by the Deputy did come within the parameters of paragraph 44(1)(b) of Schedule 10 to the Income Support Regulations, regardless of the fact that the Deputy did not have to seek the Court’s prior approval before withdrawing the money.  The local authority’s policy on charging for the cost of social care services was ruled as unlawful insofar as it took into account any of the capital derived from the claimant’s personal injury settlement.

Stephens Scown Solicitors have an experienced private client team based in our offices in Exeter, Truro and St Austell, who are all able to provide further advice on Deputyship and elderly care matters, as well as Wills, Probate, Trusts, Tax and Powers of Attorney.

Emma Gray is a Solicitor in the firm’s Private Client Team based at our Exeter office, you can contact Emma on 01392 210 700 or

ECG – 30 June 2014