High Court Decision Emphasizes CFO Management Over Trusts for Minor's Interim Funds

Citation: [2023] EWHC 3321 (KB)
Judgment on

Introduction

The High Court of Justice decision in the case of GWS & Ors v St Thomas Becket Catholic Primary School provides an insight into the court’s considerations in cases where the management of interim funds awarded to a minor is in question. Master Brown’s judgment addresses several legal principles, particularly those relating to the management of a minor’s settlement funds, the establishment and running of trusts, and cost recoverability. The case offers guidance on the court’s role and concerns when deciding between setting up a trust and the Court Funds Office (CFO) option for managing funds.

Key Facts

In the case at hand, the First Claimant, a minor, suffered severe burn injuries at a school event, resulting in interim payments totaling £430,000. The application sought approval for establishing a bare trust to manage these funds and possibly future payments, asserting it would be more beneficial compared to the CFO option due to several perceived advantages. Key considerations included the potential for investment returns, speed of access to funds, costs, and future management of funds post-majority. The solicitors proposed a trust with two trustees, one being the Claimant’s litigation friend and the other a professional trust corporation.

Several legal principles and procedural rules were pivotal in the judgment:

  1. CPR Part 21 - The Civil Procedure Rules (CPR) Part 21 dictates that court approval is necessary for settlements involving a minor. Furthermore, the court must also provide directions on how the funds should be managed.

  2. Solicitors Accounts Rules - These rules guard against the misuse of client accounts and mandate that funds be returned when there is no longer a need to hold them. This emphasizes the appropriateness of managing substantial sums of client money.

  3. The Role of Professional Trustees - The King’s Bench Guide implies that it is not uncommon in the management of child funds to employ a professional trustee or trust corporation, particularly when the court relinquishes control over the funds.

  4. Investment and Management of Funds - The court recognizes that a trust may provide broader investment opportunities compared to funds held in the CFO. However, this must be weighed against the potential costs and actual benefits provided.

  5. Cost Recovery - The question of whether the costs associated with establishing and maintaining a trust are recoverable from the defendant was a key issue, with reference to previous case law, notably Clerk v Greater Glasgow Health Board, OH v Craven, LW v Hammersmith Hospital NHS Trust, and Watt v ABC.

Outcomes

Master Brown denied the application to set up the trust for several reasons:

  • The assertion of delays associated with the CFO option was not substantiated with evidence and contradicted the Master’s experience of the CFO’s efficiency.
  • The potential advantages of a trust, such as investment opportunities, were not deemed significant enough given the interim nature of the funds and anticipated expenses.
  • The anticipated costs of setting up and managing the trust appeared disproportionate and possibly non-recoverable from the defendant, which could unjustly reduce the Claimant’s damages.
  • The court expressed reservations about the potential for an experienced trustee to manage the funds without significant overlap or additional costs from the solicitors’ ongoing involvement.

Ultimately, Master Brown decided the management of funds by the CFO in the Special Account was in the best interests of the Claimant, underscoring concerns around accountability, proportionality, and cost-effectiveness.

Conclusion

The judgment in GWS & Ors v St Thomas Becket Catholic Primary School reinforces the court’s cautious stance on incurring additional costs and complexities through the establishment of trusts when alternatives exist that can achieve the same objectives in a more streamlined and cost-effective manner. It underlines the importance of substantiation when claiming delays or deficiencies in the court-managed process and emphasizes the significance of proportionality and the recoverability of costs. Master Brown’s thorough examination provides clear guidance on the application of legal principles in managing a minor’s interim settlement, which will doubtless inform future cases of a similar nature.

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