Public Guardian v DH

This is an application by the Public Guardian to revoke and cancel the registration of a Lasting Power of Attorney (‘LPA’) for property and financial affairs.

In accordance with the President’s guidance on the publication of judgments [2014] COPLR 78, I am required to publish a judgment arising from “any case where the issues include whether a person should be restrained from acting as an attorney or a deputy or that an appointment should be revoked or his or her powers reduced.”

VH was born in 1926 and lives in her own home: a bungalow in Dewsbury, West Yorkshire.

Her husband, who had always looked after their finances, died in November 2009.

They had two children:

VH has two grandchildren:

On 12 March 2010 she made a new will, in which she appointed DH to be her sole executor. Apart from leaving £10,000 worth of pecuniary legacies to other members of the family, she gave her entire residuary estate to DH.

There is some suggestion that VH ‘changed’ her will and, although this is supposition on my part, I imagine that her previous will had been the typical mirror-image will made by most married couples with children; namely, that in the first instance she left everything to her husband, failing whom, she left her residuary estate to her daughter and son in equal shares, or to their children if either of them predeceased her.

The solicitor who drew up her will, Sephie Collins of Disken & Co, Dewsbury, recommended that she should also consider creating an LPA, and on 8 April 2010 VH executed an LPA for property and financial affairs, in which she:

Sephie Collins witnessed her signature and acted as the certificate provider, whose responsibility is to certify that at the time of signing the LPA:

An application was made to the Office of the Public Guardian (‘OPG’) to register the LPA and it was registered on 11 November 2010.

VH’s assets consist of a bungalow, in a street in which the average price of properties is £178,000. She also has four bank accounts on which there was a total balance of £948 shortly before these proceedings began.

Her income amounts to roughly £20,650 a year and comes from four sources:

VH’s son, DH, and his partner, GH, lived together for twenty years from the early 1990s until they separated at the beginning of 2012.

They own two properties in their joint names: the house in which DH lives in Goole, and a house in Castleford.

GH also owns a house in Wakefield, which is in her sole name. She and her brother inherited it from their late mother, and GH bought out her brother’s half share.

In 2011, DH decided that his mother, who was becoming increasingly frail and forgetful, would move in with him and GH in Goole. They would then take out a loan on VH’s bungalow in Dewsbury, renovate it, and let it to generate an income.

Barclays Bank made the loan on 21 October 2011 and it was secured on VH’s property.

The loan was for £72,000 gross and, after payment of the mortgage broker’s and solicitors’ fees, it amounted to £69,515 net.

In the event, the plan that VH would live with DH and GH never materialised because:

DH claims that he spent the entire loan on renovating GH’s late mother’s property in Wakefield. In the course of these proceedings he produced a spreadsheet showing that the labour costs were £46,254.70 and the materials cost £22,494.22, making a grand total of £68,748.92.

On 27 December 2012 VH’s grandson, KL, contacted the OPG to express his concern about the mortgage that his grandmother had entered into.

The OPG opened a formal investigation and wrote to DH, who replied on 20 February 2013 saying:

“The alleged concerns have been raised 100% out of spite and greed by my Mum’s grandson, KL. My Mum and I totally disagree with these alleged concerns, they are inaccurate, hurtful and unfounded and to suggest my Mum was incapable to make the decisions at the time is also very hurtful and upsetting for my Mum.

Looking back at the situation I should not have taken my Mum’s offer of the loan as I have been naïve in my decisions. I sincerely hope you can see I am not a deceitful person and have always and will continue to have my Mum’s best interest at heart. I felt as I was part way through the work at my partner’s late mum’s house that I had to finish the job. I did not appreciate the precarious position I have left both myself and my Mum in.

It was however my Mum’s wishes to make use of the money by loaning it to me. It was never a non refundable gift, but to help me and my then partner out. I am seeking legal advice to help me secure a restriction on my ex-partner’s mum’s house so that it cannot be sold or re-mortgaged without the loan being paid back.”

There are two types of Court of Protection Visitor; Special Visitors and General Visitors. Special Visitors are registered medical practitioners, but General Visitors do not need to have a medical qualification.

As part of its investigation, the OPG asked a Court of Protection General Visitor, Ruth Farrer-Hall, to visit VH. The meeting took place at VH’s bungalow on 12 February 2013 and lasted nearly three hours. In her report Mrs Farrer-Hall said:

“I asked VH if she could remember making her LPA. She told me she did not recall making it. She did not recognise the document but did recognise her own signature. Initially she stated she did not know what it was for but was later able to tell me it was to allow DH to look after all her business for her. VH could not recall her reasons for making an LPA but stated, when asked why she had chosen DH to be her attorney, it was “Because I trust him.”

I asked VH if she could cancel the LPA. She responded stating “Yes if I wanted to.” When I asked her how to do this she stated she “would probably go to a solicitor” but she told me she could not remember who her solicitor is. She told me she would ask DH if necessary.

I tried to discuss with VH what she would have to do if she wanted to cancel her LPA. She did not appear to be able to fully understand the relevant information in relation to this or to retain that information for any length or time, or to use that information to make an informed decision. She did however state that she did not want to cancel her LPA. In my opinion on the balance of probabilities I feel ‘in the given moment’ and with appropriate support from Social Services or the IMCA service to provide information to VH in a more appropriate and timely fashion and based on my observations at the time of the visit, she may have the capacity to revoke or suspend the LPA.

I am however unable to say if DH’s presence (both prior to my arrival to see VH and, although in another room, whilst speaking to VH privately about her affairs at her home address) placed any undue influence on VH.

I discussed with VH the concerns which had been raised regarding the ‘buy to let’ mortgage of £70,000 which had been taken out against her property and asked her if she felt able to talk to DH about this debt. She told me “I can talk to DH about anything.” However she could not tell me what a buy to let mortgage was. She was unable to tell me what had happened to the money borrowed or if she borrowed it at anyone’s request. She told me “DH will know better than me. I know nowt (meaning nothing). Thick as a barn door, me.”

Because of the uncertainties in the General Visitor’s report regarding VH’s capacity, the OPG asked a Court of Protection Special Visitor to interview VH. The Special Visitor, Dr S. B. Mahapatra MBBS, FRCP, FRCPsych, DPM, examined her on 28 June 2013 and compiled his report of the visit on 4 July 2013.

He considered VH’s medical history and said:

“I spoke to Dr Nicholas Elliott, general practitioner, on 28 June 2013. Dr Elliott informed me that he had never seen VH but she had been seen twice in the last two years, the first time on 14 March 2011 by Dr Heather Cole. She had confusion and memory loss and scored 6/10 on a memory scale. At the time she did not want to go to the Memory Clinic for further assessment. She was seen by Dr Andrew Smith on 2 May 2012 when she scored 7/10 on the memory scale. She has never been referred to a psychiatrist nor has she been seen by a social worker for her memory loss and forgetfulness.”

After conducting a Mini Mental State Examination, in which VH scored 17 out of 30, Dr Mahapatra concluded his report with the following observations and opinions:

The proposal to which Dr Mahapatra referred in paragraph 3 of the conclusion to his report, namely that VH would shortly be moving into warden-controlled sheltered accommodation, never came to fruition and she continued to live in her own home.

On 27 September 2013 the Public Guardian applied for the following order:

“An application is made under section 22(4) of the Mental Capacity Act 2005 for the revocation and cancellation of the registration of the Lasting Power of Attorney executed by VH on 8 April 2010 and registered by the Office of the Public Guardian on 11 November 2010.

The court is asked to invite an application from a member of the panel of deputies to become deputy in respect of VH’s property and affairs.”

The court made several orders setting out a timetable for the filing of evidence, and the matter finally was finally considered at a hearing on Wednesday 2 July 2014, which was attended by Marion Bowgen on behalf of the OPG, and DH.

Mrs Bowgen reiterated the Public Guardian’s view, which had been expressed in a witness statement dated 29 April 2014:

“The Public Guardian’s position is that, if VH had the necessary capacity and was aware of her financial affairs and the low level of her accessible capital, she would have been unlikely to enter into a mortgage which incurred fees to be paid from her account on a monthly instalment basis, which would add an additional burden to an account which already had a low balance and she had little or no other reserve to call upon. Therefore it is the Public Guardian’s view that DH has breached his fiduciary duty by making an unapproved and excessive gift which has substantially depleted VH’s capital.”

The Public Guardian’s application was for an order under section 22(4) of the Mental Capacity Act 2005 for the revocation and cancellation of the registration of the LPA.

Section 22 of the Mental Capacity Act 2005 describes the circumstances in which the Court of Protection can revoke an LPA. This section refers to the donor of an LPA as ‘P’ and the attorney appointed by the donor as ‘the donee’.

Section 22(3)(b) states the grounds on which the court can revoke an LPA. It says:

“Subsection (4) applies if the court is satisfied -

(a)

….

(b)

that the donee (or, if more than one, any of them) of a lasting power of attorney –

(i)

has behaved, or is behaving, in a way that contravenes his authority or is not in P’s best interests, or

(ii)

proposes to behave in a way that would contravene his authority or would not be in P’s best interests.”

In these circumstances, section 22(4) provides that:

“The court may –

(a)

direct that an instrument purporting to create the lasting power of attorney is not to be registered, or

(b)

if P lacks capacity to do so, revoke the instrument or the lasting power of attorney.”

To paraphrase these two subsections, the court may revoke an LPA if:

DH has changed his story several times during these proceedings.

Initially, he stated that the money his mother gave him was a loan. In his letter of 20 February 2013 to the OPG, he said, “Looking back at the situation I should not have taken my Mum’s offer of the loan as I have been naïve in my decisions. …. It was never a non refundable gift, but to help me and my then partner out.”

Nearly twelve months later, DH was ambivalent as to whether it was a loan or a gift. In his witness statement dated 27 January 2014, he said:

“I would clarify that whilst my mother has always maintained that the money she raised from the loan on her house and gave to me was a gift, I have always considered it to be a loan, and still do. I am committed to returning all the loan money my mother has given me and I confirm that I have now instructed solicitors to assist in the retrieval of my mother’s money and I enclose a copy of their letter to my ex-partner.”

And finally, in his witness statement dated 28 March 2014, and again at the hearing on 2 July 2014, DH stated categorically that it was an outright gift:

“I confirm that the money given to me by my Mum was offered and accepted as a gift. There were no conditions of repayment placed upon me nor indeed was there any agreement that I would pay my mum back. … No application was made to the Court of Protection to ratify the gift because Mum was fully competent, willing and desirous of making the gift to me. It did not occur to me that I would need to obtain the consent of the Court of Protection because my mother fully understood what she was doing and I have no doubt Mum would have been insulted if I had suggested that I should ask the Court of Protection to ratify it. Furthermore, it was and still is my understanding that since Mum had capacity to make the gift I did not need to make an application to the Court of Protection to ratify it. I was not acting on behalf of someone incapable of making their own decisions and therefore my understanding was that I didn’t need to consider the duties under the Mental Capacity Act (MCA) relating to best interests. If my understanding of the MCA is incorrect then this was a genuine mistake and I would ask the court retrospectively to ratify the gift.”

I shall give DH the benefit of the doubt and treat the transaction as a gift, rather than a loan.

When someone gives away a substantial proportion of their assets, the general rule is that they must have the same degree of capacity as is required for a will. The authority for this proposition is Re Beaney, deceased [1978] 2 All ER 595, 601, in which Mr Martin Nourse QC (who was then sitting as a deputy judge of the High Court and later became a Lord Justice of Appeal) set out the following criteria for capacity to make a gift:

“The degree or extent of understanding required in respect of any instrument is relative to the particular transaction which it is to effect. In the case of a will the degree required is always high. In the case of a contract, a deed made for consideration or a gift inter vivos, whether by deed or otherwise, the degree required varies with the circumstances of the transaction. Thus, at one extreme, if the subject-matter and value of a gift are trivial in relation to the donor’s other assets a low degree of understanding will suffice. But, at the other, if its effect is to dispose of the donor’s only asset of value and thus for practical purposes to pre-empt the devolution of his estate under his will or on his intestacy, then the degree of understanding required is as high as that required for a will, and the donor must understand the claims of all potential donees and the extent of the property to be disposed of.”

The judge added that, even where the degree of understanding in respect of a gift is not as high as that required for a will, the donor must be capable of understanding that he or she is making an outright gift and is not, for example, transferring property to someone else simply to facilitate its sale.

In this case the transaction entered into by VH was considerably more complicated than the transaction considered by the court in Re Beaney, Deceased, where Mrs Beaney had simply transferred her house to her daughter.

In this case, VH was not only giving away the gross sum of £72,000, but she was also entering into a mortgage and thereby incurring an ongoing obligation to pay the mortgage instalments to Barclays Bank. The instalments are currently £232.80 a month and, as we have seen, the purpose for which the loan was originally raised and the purpose for which it was eventually used were totally different.

I do not regard DH as a credible witness for the following reasons.

As I have shown, his story has shifted dramatically during the course of these proceedings. Initially, he said it was a loan; subsequently it was a transaction which his mother regarded as a gift, but he regarded as a loan; and finally it was an outright gift, and always had been.

The overall costs of the labour and materials spent in renovating his partner’s property in Wakefield were, remarkably, almost identical to the net amount received from the loan.

In his letter to the OPG dated 20 February 2013 DH said he was taking legal advice regarding the recovery of his mother’s funds and on entering a restriction at the Land Registry. Yet, nothing happened for almost a year. It was not until 27 January 2014 that his solicitors wrote to GH asking her to pay the money back.

On 27 January 2014 DH made a witness statement saying “I am committed to returning all the loan money my mother has given me” and, on the strength of this statement, the Public Guardian requested that the final hearing, which was originally scheduled to take place on 4 March 2014, be adjourned with liberty to restore, because he thought that the matter would be settled out of court.

DH’s conduct in these proceedings has given cause for concern from time to time. For example, on 8 November 2013 he filed an application notice stating, “Under the Freedom of Information Act I request all information relating to the original concerns received by the OPG from KL or others regarding this case.” This raised issues regarding the possible intimidation of the whistleblower.

My main reason for not believing DH, however, is the utter fecklessness of his actions and the implausibility of his story. If he really was in financial difficulties, and if his mother had offered to bail him out, it is astonishing that he should have spent all the money she had raised in renovating a property, which was owned solely by his partner from whom he was about to separate. By any standards this was an abuse of his mother’s generosity.

At the hearing I put it to DH that, even if VH had the capacity to make the gift, it was reprehensible of him to have accepted it, because it had placed his mother in what he himself described as a precarious position. His reply was that it would have been an ‘insult’ to her - ‘a slap in the face’ - to have refused the gift. This response is unacceptable and shows that, when faced with a conflict between his interests and his mother’s, he would place his own interests first.

I was unimpressed by his failure to commence proceedings against his former partner for the recovery of funds he had spent on renovating her property. On his instructions, Kenyon Son & Craddock, Solicitors, wrote to GH on 27 January 2014 saying:

“We act on behalf of DH acting as attorney for VH to recover an outstanding sum loaned out by VH to yourself and your ex-partner DH, for the renovation of your property known as [address] Wakefield. We understand that this loan was in the amount of £68,748.92. We enclose a statement of account detailing the loan amounts provided by VH for your information.

At this stage we would be obliged if you could confirm your acceptance that the above sum is owed and advise how you intend to repay the same. If you intend to sell the property, we would be obliged if you would confirm your agreement to our registering a charge on the title to ensure that the loan is protected until such time as it can be repaid with the net sale proceeds. If you wish to repay this loan by cheque please make it payable to ‘Kenyon Son & Craddock Solicitors’.

If you intend to dispute the debt please provide reasons together with supporting evidence.

In any event please provide your response within twenty-one days from the date of this letter. Failing which, we shall have no alternative but to advise our client to commence proceedings against you for the recovery of the same. As attorney for VH our client is under an obligation to protect her assets and would therefore appreciate it if this matter could be settled amicably to avoid any unnecessary additional costs being incurred.”

At the hearing DH said that the solicitors had charged him £150 for writing that letter, and that, if he were to instruct them to commence proceedings for recovery of VH’s funds, they would require a payment of £15,000 upfront on account of costs. GH had not responded to the solicitors’ letter and was unwilling to repay the money, and DH had decided to pursue the matter any further. So much for his commitment to return all the loan money his mother had given him!

Because of DH’s lack of credibility, his inexperience in assessing capacity, his vested interest in the outcome, and because of the complicated nature and effect of the particular transaction that he required VH to enter into, I prefer the Special Visitor’s opinion that she probably lacked capacity to DH’s bold assertion that his mother ‘fully understood what she was doing’ when she entered into the mortgage and handed over to him the money that had been advanced by Barclays Bank.

I am not satisfied that on 21 October 2011 VH had the capacity to enter into the transaction, which not only severely depleted her capital but also had adverse impact on her income, and I am not prepared retrospectively to approve the gift because it was neither reasonable nor affordable. VH may need these funds in future to pay for her care, either in her own home or in a residential care home or nursing home.

I am satisfied that VH lacks the capacity to revoke the LPA and that DH has behaved in a way that has both contravened his very limited authority to make gifts under section 12 of the Mental Capacity Act 2005 and has not been in VH’s best interests.

Accordingly, I revoke the LPA and direct the Public Guardian to cancel its registration.