Approval Hearings and Settlements for Protected Parties in Litigation

When litigation involves a protected party, such as a child, an individual lacking mental capacity, or a vulnerable adult, the settlement process requires additional safeguards to ensure that any agreed settlement is in the protected party’s best interest as far as possible. The Courts recognise that these individuals may not be able to protect their own legal and financial interests, and as a result, settlements must be approved at a formal approval hearing.

Who is a protected party?

A protected party is someone who, due to age or capacity, cannot conduct litigation on their own behalf. Common categories include:

· Children under the age of 18 involved in personal injury claims, clinical negligence cases, or inheritance disputes.

· Adults lacking capacity under the Mental Capacity Act 2005, where they cannot properly understand or manage litigation or its consequences.

For these individuals, litigation is usually conducted through a Litigation Friend, who acts in their best interests.

Why court approval is required

Settlements that might seem fair to the parties involved can sometimes fail to properly account for the protected party’s long-term welfare or financial security. To ensure fairness, the Court’s approval is required before any settlement becomes binding.

The Court will consider factors such as:

· Whether the amount adequately compensates for the injury, loss, or the claim in question.

· The suitability of any structured settlement (e.g. periodic payments instead of a lump sum or even a lifetime interest in an asset).

· How funds will be managed and protected. This is commonly done through the Court Funds Office or a trust arrangement with appropriate trustees in place.

· Costs and deductions, including legal fees, to confirm they are proportionate and reasonable.

The approval hearing process

The approval hearing provides the judge with an opportunity to review and safeguard the settlement. Typically, the process involves:

1. Application to Court – The claimant’s solicitors file the necessary application with evidence (such as medical reports and financial assessments, as well as an opinion from a barrister providing an opinion on the suitability of the settlement for the protected party).

2. Settlement Documentation – Draft orders and schedules of loss are prepared for judicial scrutiny.

3. Hearing – The Court reviews whether the settlement serves the protected party’s best interests. In children’s cases, the child may attend, but this is not a requirement.

4. Judicial Decision – The judge either approves the settlement or requests further information, adjustments, or renegotiation.

Managing the settlement proceeds

Once approved, funds are safeguarded to prevent misuse. Common arrangements include:

· Payment into the Court Funds Office, with funds released under judicial supervision. This is common in Children’s Personal Injury cases.

· Setting up a personal injury trust or a trust for vulnerable people for compensation or settlement received to avoid loss of means-tested benefits.

· For adults lacking capacity, appointing a Deputy through the Court of Protection to manage funds on their behalf.

Practical considerations for families and practitioners

It is unfortunate that the approval hearing adds the costs and length of the litigation process, however, the Courts see this as an essential safeguarding measure for the protected party. Furthermore, the approval hearing is a mechanism that enables the Courts to closely examine legal costs.

For families of Protected Parties the process is an opportunity for them to consider how monies might be managed so as to meet long-term care needs and maximise state

benefits. This might include the Court creating a trust to ring-fence assets against means-tested benefits.

The approval hearing process will also focus practitioners minds to ensure that settlements are structured appropriately, taking into account the protected party’s needs, and to provide maximum protection.

Conclusion

Approval hearings are not just a procedural step; they are a vital safeguarding mechanism to protect those most vulnerable in litigation. For families, this process provides reassurance that the settlement is fair, secure, and properly managed. For practitioners, it underlines the importance of thorough preparation, clear evidence, and careful structuring of settlement terms.

If you or a loved one are involved in litigation as a protected party, our Litigation team at Anthony Gold Solicitors LLP has extensive experience guiding clients through the approval process. We can help ensure settlements are not only Court-approved but also truly serve the best interests of those they are designed to protect. Please contact us on 020 7940 4060 or email us at mail@anthonygold.co.uk.

Upcoming seminar: Deputies and attorneys in civil litigation

Don’t miss our upcoming seminar Deputies and attorneys in civil litigation on 09 October from 18:30. Hear from our leading Court of Protection and Contentious Probate practitioners as they share practical insight and real-world examples, followed by a networking reception. Register now to secure your place.