Beattie v Secretary of State for Social Security

Periodic payments made under a structured settlement for personal-injury damages are treated as income for income-support purposes where they are payments received under an annuity within regulation 41(2) of the Income Support (General) Regulations 1987. Their character as capital under general law or for tax purposes does not prevent the Regulations from treating them as income. The involvement of a Court of Protection receiver does not convert the payments into income paid to a third party or bring regulation 42 into operation where the claimant receives regular payments from the capital sum. The court should examine the true nature of the transaction rather than rely on the label used for the payments. The decision was confined to the structured settlement in issue and did not undertake a comprehensive review of all possible periodic payments from personal-injury awards.

The claimant became quadriplegic after a road accident. His damages claim was compromised in October 1992 for £1,521,976. The settlement comprised a contingency fund and regular payments made to his Court of Protection receiver under an agreement with Cigna Insurance Company of Europe. The payments were indexed, guaranteed for at least 120 months, and otherwise continued only during the claimant’s lifetime.

The claimant sought income support. The contingency-fund capital was conceded to be disregarded under Schedule 10 to the Income Support (General) Regulations 1987, but the income produced by that fund counted when received. The Social Security Commissioner held that the structured-settlement payments were income under regulation 41, and that regulation 42 did not apply. The appeal concerned whether the payments were capital, notional income, or income paid to a third party for the purposes of the statutory scheme.

1. Appeal dismissed. Lord Justice Pill delivered the leading judgment, with Lord Justice Jonathan Parker and the President agreeing. The structured-settlement payments were to be treated as income for income-support purposes.
2. Regulation 41(2) of the Income Support (General) Regulations 1987 expressly provides that payments received under an annuity are treated as income. The agreement provided regular, specific and readily quantifiable payments in discharge of the insurer’s liability for the agreed damages. It was therefore a typical annuity. The court would have reached the same conclusion by examining the true nature of the transaction if a different label had been used.
3. The payments might also have constituted capital payable by instalments under regulation 41(1), but the court preferred the more direct analysis under regulation 41(2). Their treatment as capital under general law or for income-tax purposes did not alter their treatment under the Regulations.
4. Regulation 42, concerning notional income, did not apply. The claimant had regular income from the capital sum and had not deprived himself of income to secure or increase entitlement to income support. The continuing supervision of the Court of Protection did not affect regulation 41 in the circumstances of this arrangement.
5. The receiver could not be treated as a third party for the purposes of the relevant third-party payment provision. The payments were made for the claimant’s benefit, notwithstanding that they were paid to his receiver.
6. The court declined to undertake a comprehensive review of other possible methods of treating periodic payments from personal-injury awards, including the interaction of Schedules 9 and 10 and regulations 42(1) and 42(2). The appeal was dismissed, with no order as to costs.

• Court of Appeal: The appeal from the Social Security Commissioner’s decision dated 9 September 1999 was dismissed. The court held that the structured-settlement payments were income under regulation 41 of the Income Support (General) Regulations 1987.
• Social Security Commissioner: The Commissioner held that the payments were to be treated as income under regulation 41 and that regulation 42 was irrelevant.