One-stop shop stop?

Regulatory changes and market forces have spawned large legal enterprises, which must cross-sell multiple services to their clients if their business model is to thrive.

Hot on the heels of the decision of Charles J in ABC, the thrust of which was to challenge the assumption that the appointment of a professional deputy is automatic, comes the decision of Norris J in OH v Craven [2016] EWHC 3146 (QB).

Norris J concluded that where damages exceed £1m and a personal injury trust is to be implemented, and the claimant’s personal injury solicitors are also providing professional trustee services to the client, there is a presumption of undue influence.

Norris J made the following comments:

In my judgment where the litigation firm proposes the establishment of a "personal injury trust" in relation to a settlement of £1 million or more where its in-house trust corporation is to be a trustee then (drawing on the established practice in applications under the Variation of Trust Act 1958 and in trust compromises) a separate partner in the firm should instruct Chancery Counsel of not less than 5 years' standing to advise the claimant or the litigation friend in writing as to the advantages and disadvantages of the proposed private trust (both as to its strategic advantages and as to its exact provisions, including the advantage of trusts other than bare trusts) and as to the trusteeship arrangements: and this should be done at the expense of the firm. The instructions to Counsel and the Opinion should be put in evidence on the occasion when the approval of a compromise incorporating such a proposal is sought, or when an application is made for a payment out of the Court Funds Office.

I express the provisional view that where the Trust Fund exceeds (say) £3 million (so that the annual income may well be of the order of £75,000) serious thought ought to be given to including within the trust provisions the appointment of a suitably qualified family member or an independent professional as a "protector", whose consent would be required to (a) any alteration in the original trustee remuneration rates originally approved by the Court when approving the compromise or payment out; (b) the engagement of any investment advisers or managers and their remuneration; and (c) the exercise of any power which would deprive the beneficiary of income or capital to which he or she would otherwise be entitled as of right.

Norris J also made reference to ABC, where mental capacity is in doubt. Both of these cases reach beyond the scope of the Mental Capacity Act into the inherent jurisdiction of the court to assist a wider class of ‘vulnerable individuals’. Logically, the ruling in OH would also apply wherever a large PI trust is to be implemented, even when there is no need for the court to approve such terms.

Since, broadly, the legal duties of trustees form the foundation for those of financial deputies, this decision could have wider ramifications for litigation firms that also provide deputyship services to their PI clients.

Norris J referred to ‘other questions that this judgment does not address’. Whilst it is not clear precisely what he had in mind, it does not seem far-fetched to anticipate that PI solicitors offering financial services to their injured clients will get drawn into the debate on undue influence.

Does this mark the beginning of the end of the one-stop shop for PI clients?