Commentary on Sections The structure of the Act Part two – Periodical payments of damages Section 6 – Restriction on assignation by recipient
50.Section 6 of the Act inserts new section 4A into the 1996 Act which provides that an assignation of the right to receive certain periodical payments (whether outright or in security for some other obligation) is of no effect unless the assignation has been approved by a court. Whilst there is no express reference to arrestment, the effect of restricting assignation would be similarly to restrict arrestment (the legal mechanism through which creditors are able to attach a debtor’s property or rights which are in the hands of a third party as a means of recovering a debt). The provision does not restrict the ability of the pursuer to enter into an agreement to assign the right to those periodical payments, only the granting of an assignation itself. This does not affect the injured person’s ability to borrow money using the fact of their entitlement to periodical payments in future as evidence of their financial status and credit worthiness. However, it will prevent loans being secured on the future income stream under the periodical payments unless this is approved by the court.
51.Subsection (1) prevents the assignation of the right to receive certain periodical payments unless the court approves the assignation. The periodical payments in question may be paid pursuant to a periodical payment order or alternatively an agreement settling a claim or action out of court or an agreement entered into to give alternative effect to, or in substitution for, the obligations provided for in a periodical payment order (subsection (6)).
52.Subsection (2) identifies the portion of the periodical payments which is covered by the restriction in subsection (1). It is only the element of the periodical payments relating wholly to expenditure likely to be incurred by the injured person (or for the person’s benefit) in consequence of the injury which is covered by the restriction. This would include, for example, the element of the award or settlement directed at future care costs, but not future loss of earnings.
53.By virtue of subsection (3), the court must be satisfied that there are special circumstances that make it necessary. In reality this is a high standard of test and it is anticipated that courts, in considering whether or not to give approval, will want to be satisfied that the assignation represents value for money, that it is in the best interests of the individual, and how the individual will be financially supported following the assignation.
54.Subsection (4) makes the assignation of periodical payments to the scheme manager of the Financial Services Compensation Scheme an exception to the requirement for the court’s approval.
55.Subsection (5) prevents section 4A having an effect on rights which have vested in a person under an order or agreement made before section 6 of the Act comes into force.