OH v Craven

Before ordering compensation to be transferred from the Court Funds Office into a personal injury trust operated by a paid litigation solicitor or an associated trust corporation, the court must be satisfied that the proposal reflects a free and informed decision. The court assesses whether the decision was freely made, not whether it was wise. A solicitor is irrebuttably presumed to influence the client, and a transaction transferring substantial funds to the solicitor as trustee gives rise to a rebuttable evidential presumption of undue influence. The solicitor must provide evidence capable of rebutting that presumption, normally including genuinely independent advice. For settlements of £1 million or more involving an associated in-house trust corporation, independent Chancery advice should ordinarily be obtained at the firm’s expense and placed before the court.

Two personal injury claimants sought orders directing settlement funds held in the Court Funds Office to trustees of private personal injury trusts associated with the solicitors who had conducted the litigation.

In the first case, the claimant was an adult with significant brain injury who had initially been treated as lacking litigation capacity, but evidence indicated that he retained capacity to manage his affairs with support. He wished to establish a bare trust with the solicitors’ associated trust corporation as trustee. In the second case, the claimant was a minor, and his litigation friend supported a similar arrangement for funds to be held on a bare trust after settlement.

The central issue was whether the applicants’ decisions had been made freely and with sufficient information, particularly in view of the solicitor’s continuing financial interest as paid trustee.

1. Free and informed decision. The court was not required to act as a rubber stamp. Before funds were removed from the Court Funds Office, it had to be satisfied that the application was made by a person able to weigh the relevant matters and decide freely. The inquiry concerned the freedom and informed nature of the decision, rather than its wisdom. Adults may choose eccentric, unorthodox or irrational arrangements.
2. Undue influence. Applying Etridge [2001] UKHL 44, the law irrebuttably presumes that a solicitor has influence over the client. Placing a substantial sum, to which the settlor had recently become absolutely entitled, with the solicitor or an associated trust corporation as paid trustee was a transaction calling for explanation. It therefore gave rise to a rebuttable evidential presumption that the influence had been undue. The burden lay on the solicitor to adduce evidence rebutting it, typically by showing that the settlor had received independent advice and had acted spontaneously after being able to weigh the advantages and disadvantages.
3. Procedural guidance. Where a litigation firm proposed a personal injury trust for £1 million or more and its in-house trust corporation was to act as trustee, a separate partner should instruct Chancery Counsel of at least five years’ standing to advise the claimant or litigation friend in writing. The advice should address the strategic advantages and disadvantages, the precise trust provisions, alternatives to a bare trust and the proposed trusteeship. The instructions and opinion should be placed before the court when approval or payment out was sought. Where the fund exceeded approximately £3 million, serious consideration should be given to appointing a protector with specified consent rights.
4. Applications. In the adult claimant’s case, the judge communicated with him, confirmed that he remained committed to the trust despite its costs and sanctioned payment to the trustees. In the minor’s case, the judge was not satisfied that the litigation friend’s support resulted from an unconstrained choice. The matter was restored for directions after the independent advice had been obtained. A litigation friend who failed to act on proper advice might be removed, applying Re Birchall (1880) 16 ChD 41.
5. The judgment did not determine the separate questions concerning vulnerable adults protected by the inherent jurisdiction or cases involving greater doubt about capacity.