The judgment in OH v Craven [2016] EWHC 3146 (QB) has stirred significant debate within the legal community, particularly among personal injury lawyers and their clients. The ruling mandates that counsel’s advice be sought when establishing PI trusts, especially when the applicant solicitors’ firm is also acting as professional trustees, in an attempt to negate any potential conflicts of interest.
While the judgment aims to safeguard client interests, it also introduces several complex challenges. These challenges include straining relationships with parents, undermining the credibility of solicitors’ advice, and placing significant financial burdens on law firms, which may ultimately lead to higher costs for clients. This article delves into the issues raised by the judgment and proposes a more balanced approach that achieves the court’s protective aims while mitigating unintended negative impacts on clients and the legal profession.
Questioning the Validity of Solicitors’ Advice
A primary issue with the judgment is its implicit questioning of the validity and integrity of advice provided by applicant solicitors. By assuming an inherent conflict of interest whenever a solicitor’s firm recommends its trust corporation, the judgment casts a shadow over the professional advice that solicitors offer. This presumption of conflict overlooks the rigorous standards and ethical obligations that solicitors adhere to in their practice. It undermines the trust that clients place in their solicitors, who have often built strong, supportive relationships with the families over the course of lengthy litigation.
Undermining Parental Competence
Another troubling aspect of the judgment is its insinuation that parents, acting as litigation friends for their children (P), are incapable of making informed decisions regarding the administration of PI trusts. This perspective is not only patronising but also ignores the extensive experience and understanding that parents gain throughout the litigation process. Many parents have been engaged in the litigation on behalf of their child for years, during which they interact with numerous experts and receive detailed reports, including those on trust administration fees versus deputyship costs.
The Burden of Expensive Counsel Reports
The judgment’s requirement for an expensive barrister’s report for every PI trust further complicates matters. The additional financial burden is placed on the applicant solicitors, potentially diverting resources that could be better used to support the client’s needs. Furthermore, these reports often replicate information already provided in existing expert reports, which parents and solicitors are fully capable of interpreting and discussing.
While the judgment calls for the applicant firm to cover the cost of counsel’s report, which might be recouped over the trust’s lifetime, the expected fee of £4,000-£5,000 per report is an unnecessary burden for firms. For example, if a city-centre firm handles between 5 to 10 PI trust instructions annually, the cumulative cost of these reports, becomes significant. The increasing cost of counsel’s fees exacerbates this issue, potentially deterring small to medium-sized firms from accepting these instructions.
Impact on Small to Medium-Sized Firms
Ultimately, this requirement could inadvertently reduce the pool of firms willing to take on PI trust instructions, leaving only the largest and most prominent firms in the sector capable of absorbing these costs. This concentration would limit client choice and likely increase costs for clients, as smaller, more affordable firms are priced out of the market. The court’s well-intentioned safeguards could unintentionally create a monopoly, restricting access to legal services and elevating costs for P.
A Call for Proportionality
While safeguarding the interests of vulnerable clients is paramount, the approach mandated by the judgment seems disproportionate. It infantilises parents, suggesting they are not equipped to seek independent advice if they choose, and it implies that solicitors cannot be trusted to act in their clients’ best interests without external oversight. This perspective fails to recognise the professionalism and dedication of lawyers who have tirelessly advocated for their clients.
HHJ Hilder’s Judgment on Trust Corporations
In a similar context, HHJ Hilder’s 2018 judgment set forth requirements for trust corporations seeking to be appointed as deputies. She recognised the need for trust corporations to demonstrate robust oversight and regulation to ensure their suitability. HHJ Hilder concluded that trust corporations could be appointed as deputies provided they met equivalent standards of oversight and regulatory compliance, thereby safeguarding the interests of clients while not imposing undue financial burdens on the firms.
Proposed Alternative for PITs
Drawing from HHJ Hilder’s approach, here are detailed proposals for a more balanced framework for Personal Injury Trusts:
- Regulatory Equivalency and Oversight
Firms acting as trustees should comply with stringent regulatory standards akin to those required for trust corporations appointed as deputies. This includes:- Periodic Audits: Regular audits by an independent body to ensure compliance with fiduciary duties and proper management of trust funds.
- Professional Body Oversight: Registration and oversight by relevant professional bodies such as the Society of Trust and Estate Practitioners (STEP) or the Office of the Public Guardian (OPG). These bodies can provide additional scrutiny and assurance of the trustees’ integrity and professionalism.
- Transparency and Disclosure
Transparency is already mandated by the Solicitors Regulation Authority, but it’s essential to emphasise:- Comprehensive Fee Disclosure: Detailed explanations of all potential fees, including trustee and investment management fees, provided upfront.
- Alternative Trustee Options: Clearly presenting clients with alternative trustee options, including independent professional trustees, to ensure clients can make an informed choice.
- Client Empowerment: Ensuring clients understand their rights to change trustees if they are not satisfied with the service provided.
- Tiered Independent Review Process
To better align with the higher settlement amounts typically seen, a revised tiered approach could be:- Settlements Up to £2 Million: An internal review by a senior, independent partner within the firm who did not handle the litigation. This partner should review the proposed trust arrangements and provide written confirmation that the client’s interests are safeguarded.
- Settlements Between £2 Million and £5 Million: Independent advice from a financial advisor or trust expert who is not part of the litigation team but can provide an unbiased opinion on the trust arrangement.
- Settlements Over £5 Million: As per the judgment, independent Chancery Counsel advice to provide a thorough review of the trust’s structure, fees, and alternatives.
- To address the burden of costs, the litigation team for P should anticipate these expenses and include them in the schedule of loss, ensuring they are covered by the settlement award. If settlement funds are not yet available, the cost of any advice sought can be treated as a disbursement, to be paid once the funds are cleared. This ensures that the financial burden of compliance is managed effectively, making it feasible for firms of all sizes to handle PI trust cases.
- Enhanced Client Education and Support
Additional measures to ensure clients are fully informed and supported:- Educational Sessions: Offering educational sessions for clients and their families about managing trust funds, understanding trustee responsibilities, and the implications of different trust structures.
- Support Services: Providing ongoing support services, such as regular check-ins and updates, to ensure clients remain informed about their trust’s performance and any changes in regulations or trustee practices.
- Appointment of a Protector
For larger trusts, especially those exceeding £5 million, appointing a protector can add an extra layer of oversight:- Role of the Protector: A protector, who could be a family member or an independent professional, would have the authority to approve significant decisions, such as changes in trustee fees or investment strategies. This role ensures that the trustees remain accountable and the client’s interests are continuously protected.
- Consent Requirements: The protector’s consent would be required for any actions that might significantly impact the trust’s value or the beneficiary’s access to funds.
- Statement and Indemnity Insurance Requirement
In line with HHJ Hilder’s mandate for trust corporations acting as deputies, a similar requirement could be introduced for PITs:- Annexed Statement: The trust deed should include an annexed statement by the trustees declaring compliance with all regulatory requirements, including transparency, periodic audits, and the appointment of a protector where applicable.
- Indemnity Insurance: A copy of the trustee’s indemnity insurance should be annexed to the trust deed, providing proof of adequate coverage. This ensures that the trustees are financially accountable and capable of compensating for any potential mishandling of trust funds.
Conclusion
The judgment in OH v Craven undoubtedly aims to protect clients by addressing potential conflicts of interest. However, the judgment raises several concerns, such as the assumption of conflict, the financial burden on law firms, and the implications for client costs and choices.
By adopting a balanced approach inspired by HHJ Hilder’s 2018 judgment on trust corporations, we can safeguard client interests while ensuring practical legal practices. Enhanced regulatory oversight, transparency, and tiered review processes hold trustees accountable without undue financial burdens on firms. The appointment of a protector and inclusion of an annexed statement and indemnity insurance further strengthen protections.
These measures respect families’ decision-making capabilities while maintaining necessary safeguards against conflicts of interest. Ongoing dialogue and review will be crucial in refining practices to best serve all parties involved, fostering a fair and sustainable system for managing Personal Injury Trusts.
Jessica Jarvis 
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