AXC v UK Insurance Ltd

Settlement involving a protected party requires court approval under Civil Procedure Rules 1998, rule 21.10. The court must conduct an external check on the propriety of the settlement and determine whether it serves the interests of justice and the protected person’s best interests, having regard to the overriding objective. The assessment is fact-sensitive. It may take account of legal advice, expert evidence, litigation risks, recoverable losses, and independent financial advice. A lump-sum structure may be approved where it appropriately balances security, flexibility and tax efficiency in the claimant’s particular circumstances.

The claimant, a protected party lacking capacity following severe brain and brachial plexus injuries sustained in a motorcycle collision, brought a damages claim against the defendant insurer. The parties agreed settlement terms at a joint settlement meeting, subject to court approval. The hearing concerned whether the proposed gross lump-sum settlement of £4,752,203.17 was suitable for the claimant and should be approved under rule 21.10 of the Civil Procedure Rules 1998.

1. The court approved the settlement under rule 21.10 of the Civil Procedure Rules 1998. A settlement concerning a protected party is not valid without the court’s approval.
2. The court’s function is to impose an external check on the propriety of the settlement. It must exercise judgment in the interests of justice and in the protected person’s best interests, having regard to the overriding objective. The court relied on Dunhill v Burgin [2014] UKSC 18 in stating that function.
3. The proposed settlement was assessed against the legal advice, complicated expert evidence, the issues concerning recoverable loss, and the risks, strengths and weaknesses of proceeding to trial. The claimant’s counsel’s advice provided a careful and informed analysis of those matters.
4. Independent financial advice supported the proposed structure. Although a lump sum offered less security than periodical payments, it provided appropriate flexibility and achieved a suitable balance between security, flexibility and tax efficiency for this claimant.
5. The court concluded that the settlement figure and structure were suitable in the circumstances and represented the claimant’s best interests. The settlement was therefore approved.