Effect of personal injury settlement on Income Support

Court of Appeal decision

1. Charles Beattie was 17 when he was injured catastrophically in a car crash. His claim for damages was settled in 1992 for £1.6 million. Because he was and is a patient, the Court of Protection was involved, and most of the settlement (about £1 million) was put into a structured settlement, with only £100,000 being put into a contingency fund in the Court of Protection, the remainder having been used by the family to buy and equip a house. The agreement for the structured settlement provided that about £5,000 a month should be paid for a minimum of ten years, subject to increases according to the Retail Prices Index (which have now taken the monthly figure to over £6,000), together with about £10,000 every three years (again index-linked). In 1999 a Social Security Commissioner decided on appeal that the Claimant was not entitled to income support because at all material times from the time of the settlement his income under the structured settlement exceeded his "applicable amount" (section 124(1) of the Social Security Contributions and Benefits Act 1992). That decision was appealed to the Court of Appeal, which gave judgment on the 9^th April 2001.

2. It was common ground between the parties, and accepted by the Court of Appeal, that the capital in the contingency fund was to be disregarded, due to the relevant regulations, but that the income did count as the Claimant's income. The appeal was in relation to the income from the structure: regulation 46 of the Income Support (General) Regulations 1987.

3. The issue was whether the Claimant's income exceeded the applicable amount. Part V of the Regulations makes provision for the calculation of income for the purposes of section 124(1) of the Act. Regulation 40(1) provides that the income of a claimant which does not consist of earnings ... shall ... be his gross income, together with any capital treated as income under regulation 41. Regulation 41 is headed "Capital Treated as Income" and provides that any capital payable by instalments shall be treated as income. Paragraph 2 of that regulation provides that "Any payment received under an annuity shall be treated as income". Regulation 42(2) provides that "Except in the case of a trust derived from a payment made in consequence of a personal injury, income which would become payable to the claimant upon application being made but which has not been acquired by him shall be treated as possessed by him but only from the date on which it would be so acquired".

4. The argument for the Claimant was that his situation should not be treated simply as a contract between the Claimant and the insurer, attracting the operation of regulation 41, because the contract was under the supervision of the Court of Protection, and therefore a broad (purposive?) view should be taken of the arrangement, thus bringing into effect the provisions of regulation 42, which might exclude arrangements such as this. The argument was that, if the money had not been used to purchase a structured settlement, but had instead been used to create a trust, or had simply remained in the Court of Protection, it would not have caused income support to be stopped.

5. The Court of Appeal rejected that line of argument, and decided that the use of the word "annuity" in regulation 41was decisive. Therefore the income of £6,000 a month has to be taken into account, and Income Support is not payable. Because that can be a gateway benefit in some circumstances, this decision is one which must be considered in the final settlement of a personal injury action.

30 May 2001