In the matter of Various Lasting Powers of Attorney [2019] WTLR 1443

Analysis

In 15 separate applications under s23(1) Mental Capacity Act 2005 (MCA), the Public Guardian (PG) asked the court to determine the effect of language used in lasting powers of attorney which he was asked to register. Some were withdrawn, leaving 11. The common theme was that each instrument expressed an intention that the attorney use the donor ‘s assets to benefit someone other than the donor.

PS: Under the heading ‘Preferences ‘, the donor entered the words ‘The needs of [LS] before anyone else ‘. Under the heading ‘Instructions ‘, she entered the words ‘The attorney [SS] must ensure that the needs of my daughter are taken care of… ‘

AIQ: under the heading ‘Instructions ‘, the donor entered the words ‘Must make sure that you continue to look after my son in the same way that I do. ‘

MS: under the heading ‘Instructions ‘ the donor entered the words ‘…[DW] lives with me in my own home. She must continue to be allowed to live there in the event that I have gone into fulltime care. ‘ DW was the attorney.

LT: under the heading ‘Instructions ‘, the donor entered the words ‘My attorney is to make sure my daughter is given whatever financial help she needs from my estate… ‘

DJS: under the heading ‘Instructions ‘, the donor entered the words ‘If I am currently making payments towards either of my daughters ‘ living expenses then my attorneys must carry on with those payments which are currently made out of my excess income. If there is insufficient excess income these payments should come from capital. ‘ The donor later filed a COP5 acknowledgment consenting to the application and wrote a letter stating ‘I have been making, continue to make and intend that I should continue to make financial provisions for my daughters by way of gifts from my excess income on a monthly basis… I intend that as long as I have capacity to do so I will continue making these gifts and would wish them to continue from my resources after any incapacity until my death. I accept that if there has been a break in those payments prior to my incapacity that they cannot be resumed on my behalf. ‘

WJS: WJS was DJS ‘s spouse. Under the heading ‘Instructions ‘, she entered the same words as those in DJS ‘s LPA. She filed a COP5 acknowledgment in the same terms as that of DJS.

DG: under the heading ‘Instructions ‘, the donor entered the words ‘All property must be transferred into my wife ‘s name. Attorney must ensure my children are provided for. ‘

CO: under the heading ‘Instructions ‘, the donor entered the words ‘My attorneys must ensure that money put aside in my accounts for university is used for any remaining university or equivalent for [H] and [T] or if they choose not to study to help towards any employment/housing set up costs. Any remaining money after end of uni course can be used for whatever needs that person has. ‘

EF: under the heading ‘Instructions ‘, the donor entered the words ‘If my mother is still alive my attorneys must use any of my funds that are available to ensure she lives comfortably and independently. ‘

GRH: under the heading ‘Instructions ‘, the donor entered the words ‘I want my two sons to be supported financially when and if required. ‘ The attorney was one of the sons.

LS: under the heading ‘Instructions ‘, the donor entered the words ‘My attorney MUST ensure that any children (when over 18) are financially supported with my finances in any educational aspirations they may have. This MUST be equally distributed. ‘

The PG ‘s applications were pursuant to para 11(3)(a) of Sch 1 to the MCA on the ground that it appeared to him that these provisions were either ineffective as part of a LPA or would prevent the instrument operating as a valid LPA (para 11(2)). In particular, the PG asked the court to resolve the following questions:

1. (1) Were the provisions:
   1. a. invalid, as purporting to authorise gifts in contravention to s12 MCA;
   2. b. valid, as instructing attorneys to provide for persons whom the donor has a legal obligation to maintain; or
   3. c. valid.
2. (2) Where the person intended to benefit from the provisions is also the attorney, whether they were:
   1. a. invalid, since attorneys owe fiduciary obligations which would normally preclude them from benefiting on the basis that this would give rise to a conflict of interest; or
   2. b. valid, because any conflict has necessarily been authorised by the donor and the attorney must in any event act in accordance with the donor ‘s best interests.

Held:

Are benefits under a LPA to persons other than the donee unlawful unless limited to meeting those persons‘ ‘needs ‘?

An attorney under a LPA derives his authority from the donor (s9(1) MCA) but this is subject to the provisions of the MCA and particularly the principles in s1 and the donor ‘s best interests under s4 (s9(4) MCA).

It was clear from Law Com 231 para 7.11 that in recommending the legislation which became the MCA, the Law Commission regarded the phrase ‘best interests‘ as being sufficiently wide to encompass use of the donor ‘s funds to benefit another (including the attorney) (para 46) (following Re Public Guardian‘s Severance Applications [2017] WTLR 1145).

This is not limited to meeting that other‘s ‘needs‘ (Re Bloom EWCOP unrep 16 March 2012 and Re Strange EWCOP unrep 21 May 2012 not followed) (paras 48 and 49). There are four grounds for this conclusion (para 50). First, the MCA encompasses, but is not limited by, the Enduring Powers of Attorney Act 1985. Secondly, the purpose of the ‘best interests‘ test in s4 MCA is to consider the matter from the protected person ‘s point of view – limiting the attorney‘s power to benefit others to the extent to which the donor might be expected to meet their needs would be contrary to that purpose (applying Aintree University Hospitals NHS Foundation Trust v James [2014] AC 591). Thirdly, the concept of ‘best interests ‘ is wide enough to cover altruism (applying Re JMA [2018] WTLR 961 and Re G(TJ) [2010] COPLR Con Vol 403). Fourthly, attempts to define ‘needs‘ would rapidly disintegrate when subject to real-life interpretations (Re Public Guardian ‘s Severance Applications [2017] WTLR 1145 criticised).

It was, however, difficult to conceive of a scenario in which it was in the donor‘s best interests for his funds to be used to benefit someone else instead of meeting the donor‘s needs (footnote 24). An attorney contemplating such a conclusion would be well advised to apply to the court for prior approval.

Is a provision in a LPA permitting the attorney to benefit a person other than the donor a ‘gift‘ and therefore invalid except to the extent that it complies with s12 MCA?

Section 12 MCA prevents the attorney using the donor ‘s assets to make gifts except insofar as permitted under s12(2), and insofar as this is not subject to any condition or restriction in the instrument. Provisions in the instrument, however, can only impose more stringent conditions on gift-giving than those in s12(2) MCA – they cannot permit gift-giving where the requirements of s12(2) are not satisfied (para 32).

The term ‘gift‘ does not encompass all payments made from a donor‘s estate other than those for consideration (para 52) (Re Public Guardian ‘s Severance Applications [2017] WTLR 1145 followed). An attorney ‘s use of the donor ‘s funds to benefit someone other than the donor is not a ‘gift‘ when it is not linked to a customary occasion as defined by s12(3) MCA and the attorney is under a ‘degree of obligation‘ in respect of it (para 54). The obligation may come from the general law (as with spousal maintenance obligations) or it may come from s4(6) MCA under which, when considering the donor ‘s best interests, the attorney must consider, insofar as they are ascertainable, his past and present wishes and feelings (including any written statement of the same).

The latter obligation is not ‘absolute‘ – the attorney ‘s duty is only to consider the donor ‘s wishes and feelings, not to give them effect (para 55). The attorney will therefore only be acting within his authority to use the donor ‘s funds to benefit another person in accordance with a wish included in the instrument if he also considers it to be in the donor‘s best interests (applying S and S (Protected Persons) [2008] COPLR Con Vol 1074 and Aintree University Hospitals NHS Foundation Trust v James [2014] AC 591). Since the attorney must be free to not act in accordance with the donor ‘s wish to benefit someone else, realisation of that wish cannot be a condition of the donor ‘s authority under the instrument (para 56). The donor ‘s desire therefore cannot be expressed in mandatory terms. Such a provision will not be effective as part of a LPA. It would, however, be an expression of wishes to which the attorney would be obliged to have regard when considering the donor ‘s best interests under s4 MCA (footnote 25).

Is the position affected where the person to be benefited is the attorney himself?

The above reasoning also applies where the person to be benefited is the attorney (para 57). Notwithstanding para 7.60 of the Mental Capacity Act Code of Practice, an agent ‘s duty to avoid conflicts of interest and not to profit from their office is qualified where the principal has given informed consent (para 59) (following Parker v McKenna (1874) LR 10 Ch App 96). This conclusion is not inconsistent with Art 12 Convention on the Rights of Persons with Disabilities (which in any case does not have direct effect) (para 62) (following Re JW [2016] COPLR 36).

The court can manage any conflict of interest using s23(3)(a) MCA to direct the attorney to provide accounts, or to produce records, information, or documents (para 65). However, while the court could use this power to order regular ‘reports ‘, this could not be the norm (para 66). One aspect of the LPA legislation which addresses conflicts of interest is the function of the certificate provider who certifies that the donor understands the purpose of the LPA, the scope of the authority conferred under it, and that no fraud or pressure is being used to induce the donor to create it (para 67). The provider may be called to account for their opinion and, particularly where the instrument includes a wish that the donor ‘s funds are used to benefit others, both donor and attorney should consider carefully who should provide the certificate and how they have formed their opinion.

A proportionate approach must be taken to considerations of conflicts of interest (para 68). If, when he had capacity, the donor used his own funds in the way contemplated by the donor, or there is an express written statement by the donor of his wish that his funds be used in that way, there should be no requirement that the attorney seek authority from the court before using the donor ‘s funds to benefit another even if they are operating under a conflict of interest. However, in the absence of a capacitous demonstration of such beliefs or values or express statement of wishes in the instrument, where the proposed use of funds gives rise to a conflict of interest the attorney should apply to the court for prior authority under s23(2) MCA.

Disposal: the PG ‘s questions

1. a. Provisions in an LPA providing for attorneys to use the donor ‘s funds to benefit persons other than the donor are not invalidated by s12 MCA as long as they are not linked to a ‘customary occasion ‘ as defined by s12(3) of the Act.
2. b. Provisions in an LPA providing for attorneys to use the donor ‘s funds to benefit persons other than the donor are not valid if and because they relate to provision for a person whom the donor has a legal obligation to maintain.
3. c. Provisions within an LPA that provide for attorneys to use the donor ‘s funds to benefit persons other than the donor may be valid as a written statement of the donor ‘s wishes as long as they are expressed in precatory terms, but they are ineffective as part of a LPA if expressed in mandatory terms.
4. d. Provisions in an LPA providing for attorneys to use the donor ‘s funds to benefit the attorney themselves are not invalid because of the attorney ‘s fiduciary obligations.
5. e. Provisions in an LPA providing for attorneys to use the donor ‘s funds to benefit the attorney themselves are valid because any conflict has been authorised by the donor and the attorney must in any event act in accordance with the donor ‘s best interests.

Disposal: the individual cases

If the court agrees that the term is ineffective as part of a LPA or prevents the instrument operating as a valid LPA, the consequences are mandatory (para 22). Either the court must notify the PG that the provision has been severed (whereupon the PG must register the LPA with a note to that effect attached to it), or the court must direct the PG not to register the LPA (para 11(4) and (5) to sch 1 to the MCA).

If a LPA contains an instruction requiring the attorney to act contrary to the MCA or general law, it will generally be ‘ineffective as part of the LPA ‘ (paras 38-40). If the words are a precatory expression of preference, then they cannot invalidate the LPA and should not be considered ‘ineffective as part of the LPA‘. Whether a provision in a LPA is a preference or mandatory instruction is a question of construction of the instrument. Words expressed in mandatory terms should generally be interpreted as an instruction, even if they appear under the heading ‘preferences‘ on the statutory form. Conversely, words indicating an expression of preference should be regarded as such even if appearing under the heading ‘instructions ‘ on the form. The court should not interpret provisions too prescriptively or strive to set aside or sever them (Public Guardian v DA [2019] WTLR 313 followed).

Each of the provisions, other than the provision under the heading ‘Preferences‘ in PS‘s case and the provision in GRH‘s case, was properly interpreted as a mandatory instruction (para 71). With those two exceptions, the provisions were incompatible with the attorney ‘s obligation to make a ‘best interests‘ decision. They should therefore be severed, and a note inserted to that effect.

The numbers in square brackets and bold typeface refer to pages of the hearing bundle.

JUDGMENT HHJ HILDER: These proceedings [1] The Office of the Public Guardian receives applications to register lasting powers of attorney. By fifteen COP1 applications variously dated 5 or 6 July 2018 the Public Guardian applied for the court to determine the meaning and effect of words set out in certain instruments which he has been …

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