Court of Appeal comments on “double recovery” and Peters undertakings

16 Nov 2017

Damien Tinsley (by his litigation friend and Deputy) v Manchester City Council – [2017] EWCA Civ 1704 -

(The South Manchester Clinical Commissioning Group was an interested party and the Local Government Association intervened).

Peters is a reference to Peters v East Midlands Strategic Health Authority known to catastrophic injury practitioners as the source of the deputy (or Peters) undertaking as solution to the risks of double recovery of both damages and statutory funding. Tinsley v Manchester City Council (Tinsley) was an appeal from a decision in the administrative court in connection with the local authorities to provide after care services as the applicant still retained damages from his personal injury claim. The Court of Appeal rejected the council’s arguments based on double recovery and it is these comments which will most interest those involved with catastrophic injury claims.

A copy of the full judgment can found here.

The decision in Tinsley

The Court of Appeal delivered judgment in an appeal from the Administrative Court. The appeal concerned whether a person who had received damages in a personal injury action was entitled to look to the local authority for support and funding under s.117 Mental Health Act 1983 in respect of needs for which compensation had previously been paid. We reported on the first instance decision on 25 November 2016 here which held that the local authority could not withhold support notwithstanding the existence of the damages fund.

The Court of Appeal has upheld the decision and in so doing made some comments on the risks of double recovery and the use of Peters undertakings. Although this was an appeal from the administrative court concerned with the local authority’s duties under s.117, the comments about double recovery and the Peters undertaking, apply  equally to statutory funding under the Care Act (which replaced the National Assistance Act 1948 considered in Peters as the source of legislation on accommodation and care services).

Where capital and income disregards prevent the damages fund being taken into account, Tinsley suggests that the approach in Peters to controlling the risk of double recovery is flawed. That leaves the question as to whether Peters has now been opened up such that whole issue of double recovery now needs revisiting in the light of Tinsley.  Peters approached the issue as one of “choice” and that the claimant could choose between damages or statutory funding but it was made clear that the choice between damages and statutory funding had to be subject to protections against double recovery. The Court of Appeal in Peters devised the deputy undertaking having formed the view that the factual approach of the judge below (that the judge found the claimant would not seek statutory funding) provided insufficient safeguard against the risk.

In Tinsley the Court of Appeal pointed out that it was never argued before the Court of Appeal in Peters that rather than a choice, the claimant could have both damages and a right to state funding. That leaves open questions: would Tinsley have changed the decision in Peters? Does the issue of state funding now reappear in 100% liability cases? How might the ability to claim damages and then statutory funding impact on how catastrophic injury cases are to be settled if double recovery must be avoided?

Background

In 2005 the claimant, Damien Tinsley was awarded damages approaching £3.5million of which £2.89million related to future care. At the damages hearing the defendant raised the possibility of local authority funding and that the prospect of it should reduce the damages paid. That was rejected by the trial judge.

As a consequence of his brain injury, the claimant was detained under the Mental Health Act, but released shortly after trial. He met the cost of his accommodation and care from his damages fund.

In 2009 his current deputy was appointed. Concerned that mismanagement of the damages fund meant that the claimant’s needs would not be met in the future, he sought support (in 2010) from the local authority under s.117 of the Mental Health Act. Manchester City Council, the local authority, refused on the basis that he had received damages for his needs, and he still retained part of those damages.  In the first instance decision it was held that the local authority could not refuse to provide services or  payments under s. 117 even though it would lead to double recovery.

s. 117 Mental Health Act 1983

The relevant sections are set out in an appendix.  In brief, s.117 provides that following the release of a person who had been detained under the Mental Health Act, the Clinical Commissioning Group or the local authority are responsible for providing after care services. These are defined by the Act as services which have the purpose of meeting a need arising from the mental disorder, or reducing the risk of deterioration in mental condition or re-admission to hospital.

The House of Lords in R v Manchester City Council ex parte Stennett[1] held that local authorities are not entitled to charge for the services.

The appeal

The judgment sums up the question to be decided as:

 “whether the claimant was entitled to require his local authority to provide after care services, under s. 117, at any time before he has exhausted sums reflecting the costs of care awarded to him in a judgment in his favour against a negligent tortfeasor”.

The local authority conceded that the claimant could do so once the damages fund was exhausted, though there seems a suggestion they might consider how that had come about, presumably with the first deputy’s mismanagement in mind.

The Court of Appeal rejected arguments by the local authority that the construction of s.117 did not require them to make provision. However, it is the second line of argument based on the need to avoid double recovery which, although unsuccessful, drew comments from the Court of Appeal which has wider interest for compensators.

Court of Appeal’s comments in relation to double recovery and Peters

The authority argued that to allow such a claim (for after care services under s.117) would offend the principle  of preventing  double recovery recognised in the personal injury field by cases such as Crofton v NHSLA[2] and Peters v East Midlands Strategic Health Authority[3], and earlier cases

In Tinsley the Court of Appeal said:

  1. The courts will seek to avoid double recovery at the time of assessing damages. If it is clear at trial that local authority provision would be relied upon, the claimant could not recover damages from the tort-feasor. Crofton was authority for that.
  2. It does not follow that if the claimant is awarded damages for his aftercare he is precluded from making an application to the local authority.
  3. If a claimant were to do that very quickly after judgment, the truth of the assertion that he did not intend to use state funding would be called into question and the damages case could be re-opened.
  4. When the Court of Appeal heard the appeal in Peters it recognised the concerns of the judge below about the risk of double recovery but would have upheld his factual finding that there was in fact no risk in that case, if the defendant paid for the costs of care. However, the Court of Appeal felt reliance on the factual finding unsatisfactory, and wanted to make the position more watertight. It came up with the proposal of amending the deputy’s appointment order to include a prohibition on seeking local authority funding without seeking the Court of Protection’s authority. So, although the defendant’s appeal was dismissed the Court of Appeal applied an additional mechanism.
  5. However, in Peters it was not argued that the claimant had the right to seek statutory funding even after receipt of damages: "...there does not seem to have been any argument…to the effect that there is a right on the part of the claimant, after an award has been made, to look to the local authority if he or she prefers to do so.
  6. The approach adopted in Peters involved a deputy undertaking not to seek statutory funding. In Tinsley, Longmore LJ doubted that it was right to ask deputies to give undertakings of the sort given by the deputy in Peters. It was not right to transfer to the Court of Protection the burden of deciding whether a claimant was entitled to local authority provision. Moreover, that court looks after the interests of protected parties, it does not decide substantive issues against third parties, and it was hinted that the Court of Protection would struggle to find that the local authority was not obliged to provide services if that was against the interests of the claimant and maximising the available funds.
  7. It would be for the Administrative Court rather than the Court of Protection to decide on that issue. In so doing, reference was made to an earlier unreported decision of Senior Judge Lush in the Court of protection: re Reeves. In that case the damages award pre-dated Peters. For that reason, the deputy’s order did not specify that claims for state benefits should not be made. There was nothing to inhibit the deputy’s duty to act in the protected party’s best interests and claim all stated benefits for which there was an entitlement. It was also remarked that the Court of Protection was not the forum in which to adjudicate such matters.
  8. The Administrative Court had reached the correct view in holding that the entitlement under s. 117 existed irrespective of the claimant still possessing part of the damages fund.

 Peters and Tinsley compared

It is worth looking at the Court of Appeal’s decision in Peters , and comparing it to the same Court’s views in Tinsley  to see if it should be argued that Peters has been affected, or at least the device to control the risk of double recovery now needs revisiting. This we have done in the following summary and shorten the cases to “P” and “T” for simplicity:

  • In P “provided there was no real risk of double recovery the judge was right to hold that there was no reason in principle why the claimant should give up her right to damages…rather than become dependent on the State. The judge was right to be concerned about the possibility of double recovery. T indicates that there is likely in all cases to be a risk of double recovery as the receipt of damages does not always preclude a claim for statutory funding; the claimant remains entitled to, and the local authority remains liable to make, payments regardless of an existing damages fund where the existence of the fund does not prevent entitlement.” [4](as would also be the case where capital and income disregards apply). T stated that this point was not put to the Court of Appeal in P.
  • In P the approach centred on the right to choose one or the other of damages or statutory funding. There was no argument or consideration of a scenario in which there was a right to have both despite electing for damages which did not take the funding into account. P looked at damages and statutory funding as two potential sources of making good the loss, one of which the claimant could choose and “provided there was no real risk of double recovery”[5]
  • According to T, only where it was found at trial that funding was likely to be used could it be taken into account or, if started soon after trial (suggesting the claimant had misled as to intentions) could the case re-opened by the defendant. Beyond that (and timing is far from clear) the choice to have damages left the right to statutory funding unaffected and could lead to double recovery.
  • In P the factual finding the judge made that funding would not be sought in the absence of a “wholly unexpected development”, was held to be “not an entirely satisfactory way of dealing with the possibility of double recovery”; the lack of any clarity on what would amount to “wholly unexpected” meant further steps should be taken. Those steps were to have the deputy’s order amended to remove authority to seek funding without first obtaining the permission of the Court of Protection. That court (the Court of Protection) would refuse that authority if “unnecessary and contrary to the intendment at the assessment of damages”. Conversely, in T it was doubted that it could be right to transfer to the Court of Protection the task of deciding whether a claimant could claim from the local authority. That court did not decided substantive rights against third parties. Moreover, its task was to promote the interests of the patient (not damages paying defendants) which would usually be achieved by permitting after-care services.
  • In T the view was that it was for the Administrative Court to consider if a local authority had met its statutory function rather than the Court of Protection, as suggested in P. The administrative court had reached the right decision in this case that the statutory obligation applied notwithstanding the claimant possessing a damages fund.

It appears that the Peters solution to the risk of double recovery is questioned by Tinsley. The requirement to avoid double recovery is common to both judgments but Tinsley makes clear that existence of a damages fund does not preclude statutory funding even if that amounts to double recovery. It is not a “choice” issue. The device put forward in Peters in the light of the unsatisfactory solution by the Judge below, and said to be an “effective way of policing the matter” does not, if Tinsley is correct, achieve that “policing” effect. There would seem no other way to prevent double recovery other than to return to the pre-Peters position of statutory funding being reflected in the calculation of damages even in 100% liability cases. It is going too far to say that Tinsley has over ruled Peters, particularly as both are Court of Appeal decisions, and consider different contexts, but it may be that a damages suitable case is now needed to clarify the double recovery protection.

Local Government Association as intervener

The Court of Appeal in Tinsley commented that:

“Local authorities are concerned about the potential implications of the Administrative Court’s decision especially since Schedule 4 to the Care Act 2014 applies sections 31 and 32 of that Act to the provision of after-care services, so that direct payments can be made instead.”

This comment was followed by “few claimants who have been awarded the costs of private care will voluntarily seek local authority care while the funds for private care still exist.”

That following statement, in the absence of evidence, is one that is hard to agree with. In particular, it may conflict with expectations on the part of those representing a claimant’s interests to maximise available funds.

This decision may increase efforts by local authorities to seek a review of the whole area of statutory funding for recipients of personal injury damages, including the rule on capital and income disregards, in respect of funding under the Care Act. The Local Government Association (LGA) has anticipated a funding shortfall of £5.8billion by 2020, so any extension of payments to already compensated people will only compound the situation in addition to offending the principle against double recovery which the courts have firmly said should be avoided. The point is most acute where the local authority is both damages payer and statutory funder.

Pressure to amend the law may exist alongside other calls, arising in  the clinical negligence field,  for a review of tort and damages law, in particular s. 2 (4) of the Law Reform (Personal Injury) Act 1948. That currently sets up the risk of claimants recovering the cost of private treatment and then having “free” NHS treatment – even more of an issue, again, where the NHS is also the compensator. Both the NHS and local authorities have reasons to want to see the law changed and were that to happen, that would inevitably impact how damages claims are resolved. That said, opportunities to do this have been available but not taken over the years and there are practical problems in making these changes.

What this means for you

Our previous note set out a number of points arising from the first decision. These are repeated below where appropriate supplemented by additional points arising from the appeal.

  1. The case is a useful reminder of the availability of support to previously detained persons under s.117 and the basis on which the decision about provision should be made.
  2. Cases involving actual or risk of detention under the Mental Health Act arising from traumatic brain injury are not uncommon. The possibility of NHS or local authority support after release from detention should be considered. Funds from the personal injury damages will not, on the basis of this judgment, prevent the claimant receiving support. That might be helpful during the earlier parts of a claim. Conversely it could lead to double recovery. Steps may be needed to try to prevent that.
  3.  “Incarceration” clauses which appear in periodical payment orders suspend the payments during detention. However they need to be linked with Deputy undertakings and indemnities. This will ensure that the defendant is aware that a claim under s.117 is being made after release from detention, and steps can be taken to prevent double recovery by ensuring that support or funding received leads to adjustment of the annual payments.
  4. The comments made by the Court of Appeal directed to double recovery and Peters undertakings extend beyond the confines of s.117. Peters was concerned with local authority funding which would now fall under the Care Act, but the same device is used to prevent double recovery in those circumstances as well as NHS continuing healthcare.
  5. The traditional approach has been to obtain Peters undertakings (unless the parties have catered for funding by some other means), which requires that a deputy has been appointed. The Court of Appeal’s comments indicate a view that the Court of Protection should not be called upon to consider such issues, rather that the Administrative Court was the right forum. However, the jurisdiction of that court seems inappropriate for adjudicating on a personal injury damages matter and is more concerned, as seen with the first instance case, with the public law issues that led to the claimant being entitled to recover funding notwithstanding the receipt of damages.
  6. Although obtaining a deputy undertaking should still be pursued – perhaps better than nothing (and see point 8) – the protection it provides post Tinsley is in doubt.
  7. If there are existing reverse indemnities and resistance is being encountered to statutory funding, Tinsley indicates that should proceedings be raised in the administrative court against the local authority, the existence of the damages fund and/or the risks  of double recovery are unlikely to provide a basis for not providing statutory funding. The point can be made prior to the issue of proceedings if need be.
  8. If there is evidence that social services after care will be sought that should be taken into account when assessing damages. A damages case could be re-opened if funding was sought so soon after settlement that the claimant’s assertion that funding would not be obtained was called into question. It is not  immediately clear how the defendant would know this without an undertaking to inform them, nor what time should elapse or what  circumstances arise before the claimant was simply availing himself of a right which the Administrative Court and the Court of Appeal said was his.
  9. The status of Peters is unclear. Nor is it clear what the outcome would have been if it had been argued that the claimant would have the right to seek statutory funding in any event.  If the “policing” device adopted in Peters is ineffective another means must be found or account taken of actual or potential funding, when assessing damages.  It seems there is a need to resolve the issue of double recovery once again, with an appropriate case directly raising again the question of double recovery in a damages setting.
  10. There are obviously problems with this outcome if it leads to claimants being overcompensated at the expense of either premium payers or tax payers who fund local authorities and the NHS.

Appendix s. 117 Mental Health

Section 117 of the 1983 Act (as currently in force) provides:-

(1) This section applies to persons who are detained under section 3 [of the Mental Health Act]… and then cease to be detained and (whether or not immediately after so ceasing) leave hospital.

(2) It shall be the duty of the clinical commissioning group [“CCG”, previously the Primary Care Trust, “PCT”]… and of the local social services authority to provide or arrange for the provision of, in co-operation with relevant voluntary agencies, after-care services for any person to whom this section applies until such time as the clinical commissioning group or … and the local social services authority are satisfied that the person concerned is no longer in need of such services …

(6) In this section, “after-care services”, in relation to a person, means services which have both of the following purposes –

(a)Meeting a need arising from or related to the person’s mental disorder; and

(b)Reducing the risk of a deterioration of the person’s mental condition (and, accordingly, reducing the risk of the person requiring admission to a hospital again for treatment for mental disorder).”


[1] [2002] 2 AC 1127

[2] [2007] 1 WLR 923

[3] [2010] QB 48

[4] As may be the case in situations other than s. 117 where capital and income disregards lead to entitlement under the Care Act

[5] Para 56 of Peters Court of Appeal

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Disclaimer: This document does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest to customers of BLM. Specialist legal advice should always be sought in any particular case.

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Andrew Hibbert

Andrew Hibbert

Partner, Head of BLM’s Catastrophic Injury Practice Group,
Southampton


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