JS v KB & Anor (Property And Affairs Deputy for DB)

This cautionary tale illustrates vividly the dangers of informal family arrangements for an elderly relative who lacks mental capacity, made without proper regard for:

The case concerns DB; she was born in 1923, and it therefore now 90 years old. She suffers from a progressive dementia. She has been cared for by JS (her daughter) and MS (her son-in-law) for over three years now, in line with a family arrangement first discussed with KB (DB’s son) over their Christmas day meal in 2009. The actual care arrangement is in many ways excellent; DB is receiving devoted care and is reported to be happy. For this, JS and MS deserve genuine credit.

However, the informal, and as I find improper, means by which DB’s finances were utilised by JS to fund the current care arrangement led to the sale of the home in which she had lived for over fifty years effectively ‘over her head’, and the proceeds of sale being placed out of her immediate reach, rendering her financially highly exposed; state benefits and retirement pension payable to DB have subsequently been diverted into an account in JS’s name. All of this was done without legal authority. Only with the intervention of the court appointed deputy was the situation regularised.

Regrettably, the actions of JS, of which DB would have been largely unaware, and which were in some important respects kept secret from KB, caused a deep schism within the family, generated lengthy and avoidable litigation, and caused the parties to expend considerable sums which they can little afford in legal costs.

KB is not entirely blameless in the tale. He knew or reasonably believed that his mother lacked capacity to manage her financial affairs when arrangements were being made to establish the current care regime, made no enquiries of his own, and (at least for a period of time) acquiesced in the arrangements.

This judgment is delivered at the conclusion of a two-day hearing simply to determine the award of costs of proceedings in the Court of Protection.

The application before me, dated 26 March 2012, was in fact made by JS when she sought appointment by the Court of Protection under section 19(1) of the MCA 2005 as DB’s deputy. By such an appointment, JS sought to have the authority to continue to make decisions on behalf of DB (which she had been making for some time) given that DB was unable to make such decisions for herself, in relation to her property and financial affairs.

That application was resolved finally, save for this question of costs, by HHJ Hodge QC on 6 September 2013. By order made on that date (which was consensual), it is recorded inter alia that JS agreed not to pursue her application to be appointed as DB’s property and affairs deputy.

The costs issue was left unresolved. The total bill of costs of the three parties is in the region of £70,000. I have been asked to determine whether the costs of this litigation incurred by KB and MP (on behalf of DB) should be paid by JS, or paid by DB or charged to her estate.

The relevant costs regime is set out in section 55 Mental Capacity Act 2005 and in Part 19 of the Court of Protection Rules 2007. The essential features are as follows:

In interpreting these statutory and other provisions, I have had regard to the decision of Peter Jackson J in London Borough of Hillingdon v Neary [2011] EWHC 3522 (COP), in which he, in turn, considered the previously decided cases of SC v London Borough of Hackney [2010] EWHC B29 (COP) (Senior Judge Lush), G v E & Ors [2010] EWHC 3385 (Fam), Manchester City Council v G & Ors [2011] EWCA Civ 939 (Baker J / Court of Appeal); D v R (the Deputy of S) and S [2010] EWHC 3748 (Henderson J), AH v Hertfordshire Partnership NHS Foundation Trust & Anor (including costs) [2011] EWHC 276 (COP) and [2011] EWHC 3524 (COP), (Peter Jackson J).

I have also considered VA v Hertfordshire Partnership NHS Foundation Trust [2011] EWHC 3524 (COP); I approach this case, as Peter Jackson J did on the basis that:

“each application for costs must be considered on its own merit or lack of merit with the clear appreciation that there must be a good reason before the court will contemplate departure from the general rule” (§12).

These earlier reported decisions are, essentially, no more or less than illustrations of the rules; this case itself will do no more than illustrate, I suspect. That said, I have noted that:

As will be apparent, I was invited to hear some limited oral evidence on key aspects of the case in order to assist my enquiry.

There are disputes of fact, which I have been required to resolve, and which I discuss at §50 to §65 below. The uncontentious background facts are as follows.

In 2009, DB, then 86 (now 90), was living alone at her home at 1 Ash Grove (‘Ash Grove’)[The addresses have been changed to protect the anonymity of the parties]; she had lived there for more than 50 years, together with her husband until he died in 1999. Her two children, JS (now aged 66) and KB (now aged 64) were reasonably regular visitors.

At that time, JS lived with her husband, MS (aged 68), in rented accommodation, but owned a property in Spain (‘the Spanish property’); JS and MS intended to retire to the Spanish property. MS suffers with muscular dystrophy, and had been retired from work on grounds of ill-health.

On their visits to their mother during the autumn of 2009, JS and KB separately formed the view that DB was finding it hard to care for herself. She appeared to be confused; according to JS, DB “started to show signs of confusion with the smallest thing”. DB was struggling with cooking and using the washing machine; although she had enjoyed the independence of driving, at this time she was involved in a minor motor accident which was indisputably her fault. She appeared to be sleeping more. It is now acknowledged that by “at least mid 2009” DB was in fact displaying the early signs of dementia (mixed Alzheimers and vascular dementia).

It is accepted at this hearing by both KB and JS (and supported by expert opinion) that in 2009, at the latest by the start of 2010, DB did not have capacity to manage her property or financial affairs. Specifically, on the facts of this case, at the material time:

On Christmas day 2009, KB joined JS, MS, DB and SO (JS’s daughter) to enjoy family celebrations at SO’s home. Over the festive meal the family conversation turned to the importance of providing safe and appropriate living arrangements for DB in the months/years ahead; this conversation was described as “light hearted” by JS; SO told me that “nothing seriously [was] discussed”. During the conversation JS offered for herself and her husband to give up their rented home to move in with DB, and care for her.

It was tacitly, if not explicitly, understood by all that DB’s home at Ash Grove would not be adequate (and indeed would be increasingly unsuitable, given its stairs) for this new arrangement, and the conversation turned to purchasing a substitute three-bedroom single-storey home for the three of them to occupy together.

And so was hatched the plan which developed over the following months. According to KB, following this good-natured family discussion JS asked KB to sign a document; oddly, he said that he was “not allowed to read the document”, and felt pressurised to sign it. The experience, following the light hearted discussions, left him feeling “slightly uneasy”, but he did not want to ‘rock the boat’ having “just agreed what I thought at the time to be an ideal solution for all parties”. This odd account is not accepted by JS.

In early 2010, according to both JS and KB, DB’s mental capacity “to manage her affairs and care for herself” continued to fail, a point confirmed by MP’s researches upon her appointment.

Estate Agents and solicitors were instructed in the early part of 2010, and Ash Grove was duly sold on 8 June 2010 for £215,500. Simultaneously, a new home was purchased at 3, Beech Avenue (“Beech Avenue”) for £155,000. Astonishingly, in my view (having particular regard to the clear guidance of the SRA Code of Conduct 2011), the same firm of solicitors (PK) acted for DB on the sale and JS on the concurrent purchase, and all at a time when (as indicated at §19 above) it is now agreed that DB lacked capacity to manage her financial affairs. All correspondence concerning the sale and purchase was sent to JS at her home address, not to DB at Ash Grove.

Beech Avenue required significant renovation and adaptation to meet the needs of DB, aswell as MS; the total cost of renovation (which was, notably, all undertaken by JS’s son; it is not clear to me whether this was the result of a competitive tender), which was undertaken to a high standard, was in the region of £46,000 to £58,700. The building work took six months. The purchase of the property at Beech Avenue, the associated legal costs of purchase, and the renovation costs, were all paid from the proceeds of sale of Ash Grove.

Legal title in Beech Avenue was conveyed not into the name of DB as one might have expected, but into the names of JS and MS.

There is a dispute of fact (which I resolve below) as to when KB knew that the Beech Avenue property was to be (or had been) conveyed into the joint names of JS and MS:

It is apparent that from this point on, the relationship between KB and JS deteriorated markedly – a pointer that KB’s account set out in §27(ii) above is more likely to be accurate than JS’s in §27(i).

In January 2011, KB instructed solicitors, and they wrote to JS, and (when instructed) to her solicitors. Over the course of that year, solicitor letters passed to and fro. Little progress was made in resolving the issue; JS’s solicitors responded to KB’s request for resolution of this situation by repeating that “your client has always been fully involved … your client has always been aware the property would be registered in our client’s name”. This was not accepted.

Notably, on 17 August 2011, KB’s solicitors specifically requested that JS transfer the Beech Avenue into the name of DB.

JS refused.

I should add that in January 2011, DB had executed a will in the presence of JS’s solicitors. It is now acknowledged that at the time, DB had no testamentary capacity, and the will has subsequently been set aside.

Towards the end of 2011, KB (again through solicitors) informed JS that he intended to report her to the Office of the Public Guardian, and in January 2012 wrote to inform her that he intended to make an application to the Court of Protection, asking for their co-operation in obtaining an assessment of DB’s capacity. JS arranged that assessment which was undertaken by Dr Eleanor O’Byrne, MB ChB, FRCPsych. The opinion was available in early March; she opined that DB has dementia (mixed alzheimer’s disease and vascular dementia) leading to impairment of memory, impairment of ability to absorb and to weigh information, and lacked capacity to “deal with financial affairs, paying bills, dealing with savings, knowledge of assets.” This was a progressive condition, and there was no real prospect of her regaining capacity.

On 26 March 2012 JS forestalled KB’s intention to seek relief from the Court of Protection, and issued an application to be appointed deputy for DB. She declared in her application form:

“The patient upon sale of her property in 2010 loaned £200,000 approx to enable her daughter to purchase 3 Beech Avenue which was a property renovated and bought by daughter and son in law to accommodate the patient. The monies are to be repaid to the patient upon sale of the daughter’s property in Spain which is currently on the market.”

In her deputy declaration she added:

“on sale of P’s property in 2010, moneys were invested in suitable Deputy’s property in order to provide home for P and Deputy to ensure adequate care.”

In support of her application, she purported to give the standard undertaking (on Form COP4) to the effect that:

“I will ensure that my personal interests do not conflict with my duties as a deputy and I will not use my position for any personal benefit”

She also gave a standard undertaking to “keep money and property” of DB “separate from my own”, notwithstanding that, at the material time, she and DB had a joint bank account, containing the much-diminished balance of proceeds of Ash Grove, about £10,400.

On the form COP1, JS stated that DB had “monies invested in Beech Avenue”; this statement did not accurately, in my judgment, reflect the fact that Beech Avenue had been purchased and renovated wholly from DB’s monies.

When KB was advised of JS’s application he wrote to the court and formally objected to JS’s appointment.

It is unclear whether KB’s response ever reached the court, but JS’s application for deputyship was in any event rejected on the papers by DJ Ralton on 19 July 2012. He concluded, with particular regard to the large ‘loan’ in relation to Beech Avenue (§34 above), that “JS is in a significant conflict of interest” and that it was in DB’s best interests for an impartial panel deputy to be appointed.

On 9 August 2012, JS submitted a statement to the Court of Protection challenging DJ Ralton’s decision, and requesting that she at least be considered as a joint deputy with a panel deputy.

On 16 November 2012, JS’s application was listed before HHJ Hodge QC; at that hearing JS and KB accepted the appointment of a panel deputy in the interim. This did not, however, deflect JS’s continued aspiration to be her mother’s deputy.

In January 2013, JS instructed her solicitor to write to KB’s solicitor that she was willing to work towards a “positive outcome” but asking that her “financial contribution towards the property initially” was properly recorded. This is a reference that JS had allegedly invested some £13,000 of her own savings in Beech Avenue.

On 31 January 2013 (erroneously marked 2012), JS’s wrote to KB’s solicitors setting out a range of ‘options’ for resolving the dispute. By all of the options, JS sought security of tenure (at least rent-free accommodation for life).

On 13 February 2013, MP, a local solicitor, was appointed by the Court as deputy for DB.

On 12 March 2013, HHJ Hodge QC made case management orders in the case. Significantly, although JS was still asserting that she had a beneficial interest in Beech Avenue, the Court permitted MP (without formal opposition albeit not by consent) to register a 100% charge of the beneficial interest of Beech Avenue in favour of DB. Permission was further given to MP to draw up a statutory will by which DB’s net estate would be split in equal shares between KB and JS.

Following the hearing, MP issued questions of the protagonists to which they responded.

On 23 August 2013 a Joint Settlement Meeting (JSM) was arranged; a note had been prepared on JS’s behalf. Her written case for that meeting revealed that she was proposing that the professional deputy should be removed after “formal documentation” supporting the monies spent on Beech Avenue had been produced. She did not acknowledge the need for an independent deputy to manage the property and affairs of DB; she sought, among other matters, 18% of the beneficial interest in the property. JS indicated that if her proposals were not accepted, she and MS would consider moving forthwith to Spain, placing Beech Avenue on the market, and placing DB in residential care; “to an extent”, JS now accepts, “the position set out in my JSM note could be described as being a gun to the head”.

When the application was next before the court on 6 September 2013 for directions, JS had had a change of heart. At court, she indicated an intention to withdraw her claims, and wished an end to the proceedings. Discussions ensued, and an order was made by HHJ Hodge QC which records JS’s agreement (among other matters) that:

This was, essentially, a wholesale withdrawal of JS’s application and supporting claims.

The issue of the costs of the proceedings was adjourned for determination by this Court. It is that question of costs which I must decide. As to this:

I was invited to hear limited oral evidence about key events in the early history in order that I could form a view about the provenance of the dispute which led to the protracted litigation. Of course, and in any event, it is to be noted that “conduct before, as well as during, the proceedings” may be taken into account in making a costs determination.

I heard from JS, her daughter SO, and from KB.

Before turning to the evidence itself, I should say at once that on matters pertaining to the welfare of DB, JS deserves much credit; she plainly offers her mother good quality care. I heard about the well-appointed home, and DB’s happiness with the current arrangement. At times JS was understandably emotional in discussing these aspects of her, and her mother’s, current life; she plainly feels that she and her husband have made a significant sacrifice in entering into this arrangement, and this underscored her evidence. However, in relation to DB’s financial affairs, which were under scrutiny at this hearing, JS had a different tone; she was defensive and guarded. Occasionally she was even quarrelsome when answering counsel’s questions, and appeared aggrieved (even affronted) that she was being questioned over her actions in relation to her mother’s money. On important aspects of the history, I felt that she had a tendency to remember events as she would want them to have happened; inconsistencies in her written and oral evidence exposed the shaky foundations of her case.

KB was a diffident man; he gave the appearance of wanting a simple and easy life, and was more than happy to take the ‘back seat’ when his sister offered to care for their mother. Doubtless, for financial aswell as emotional reasons he recognised the value of the arrangement which placed the responsibility for day-to-day care with JS.

I was invited to consider first when it can be said that the discussions first took place between family members about the arrangements for JS and MS to reside with DB. JS sought to persuade me in oral evidence that she and KB had “thrashed out” the details of the arrangement by which JS, MS and DB would live together, well before the Christmas meal in 2009.

If there were such discussions, they were not referred to in JS’s various written statements of evidence, and not at all consistent with her written case about the Christmas day discussion. If the pre-Christmas conversations were as detailed as I was being encouraged to believe, it is astonishing that they had not been referred to earlier. KB had no recollection of such discussions.

The late emergence of evidence about pre-Christmas discussions, and the absence of supporting material generally, leads me to conclude that JS is wrong when she now points to a time before Christmas as the starting point of the negotiations. SO for her part did not give me to believe that the Christmas day discussions were the culmination of ‘thrashed out’ negotiations. In my judgment, the first discussion about the arrangement by which JS, MS and DB would live together took place at the Christmas dinner table. There followed one, possibly more than one, conversation between KB, JS and possible SO at which the arrangements were discussed.

Since being challenged on the arrangement by which she acquired legal title to Beech Avenue, JS has maintained that the conveyance into her name, on the basis that it was to be a loan until the sale of the Spanish property, was undertaken with the knowledge and consent of DB, and of KB.

Having listened carefully to the rival accounts, I reject JS’s case in this regard.

First, on the evidence before me, it is agreed that DB lacked capacity to deal with her financial affairs at the material time. In my judgment, whatever DB may or may not have said, she did not have the capacity to agree that JS and MS should have the legal title to the property which was to be her home, nor to agree to a loan. JS, in my judgment, knew this.

Secondly, other than JS’s word, there is in fact no evidence of a loan. There is no memorandum or note of any agreement between DB and JS which evidences the loan; there is no document, however amateurishly drawn, to support JS’s case that her mother agreed to entrust JS with the entire proceeds of her home, and/or that she expected repayment when the Spanish property was sold. There is little evidence (and this only emerged reasonably late in the day) that the Spanish property was even being marketed.

KB’s alleged knowledge of the arrangements for the conveyance, and the existence of the loan, derive only from JS’s recollection of conversations. On the evidence before me, I was left to conclude that there were no meaningful conversations between them about the conveyance at all. It is more likely than not that KB assumed that the property would be conveyed into the name of his mother, but did not explicitly check this with his sister; JS did not tell her brother of her actual intentions, nor did she mention the loan, until after the property had been purchased.

On the most favourable construction, it is possible that JS thought that she had told her brother, but in fact had not; she accepted, in cross-examination, that it was possible that she and her brother had been ‘at cross-purposes’ about the arrangements, on the basis that she had not spelled out to him what was happening (a concession which was at odds with her oft-repeated and confident assertion throughout the proceedings that he did indeed know about the arrangement).

It is in fact more likely than not in my judgment that JS deliberately withheld the details of the conveyance from KB, knowing – or strongly believing at least – that he would object. I find that she lied to KB, and to the court, in asserting that KB had always agreed this. In my judgment, JS acted in this way because she wanted to give herself a degree of security, and felt entitled to some compensation for the sacrifice of looking after her mother (possibly abandoning her plan to retire to Spain). The plan also suited MS who has a significant disability himself; the adaptations to the property ostensibly for DB, just as importantly benefited him.

JS told me that KB had been motivated into agreeing this arrangement so that he would be in a position to receive a gift of cash from DB when the Spanish property sold, and the loan was repaid. I reject JS’s account of this alleged conversation, which was in any event not supported by her daughter’s evidence on the same point: she told me that it was JS who had suggested this possibility to KB.

Drawing the threads together of the disputed facts, and against a background that:

No party alleges that JS was attempting to perpetrate a fraud or attempted fraud upon DB, or attempted fraud of KB.

At an early stage of the inter-solicitor correspondence, Hibberts, on behalf of KB, indicated that a presumption of undue influence had arisen. Even though there was a reasonable evidential and legal basis (per Stevens v Leeder [2005] EWCA Civ 50, [2005] All ER (D) 40) for this assertion, it was not actively pursued through correspondence or in the litigation.

In my finding, the wholly unsatisfactory ordering of DB’s finances probably evolved as an extension of natural and genuine wish (on the part of JS and KB) to provide family support for their elderly mother. Over the years prior to 2009, JS had, I accept, routinely offered help to her mother, at a low-level of intervention, in the management of her finances. As it became increasingly apparent to JS that her mother’s capacity was waning in late 2009 and 2010, so, in my judgment, did JS step up her intervention in this respect. It seemed to me that she made ever-increasing assumptions about her authority to manage DB’s financial affairs, initially encroaching subtly on that activity, but by the summer of 2010 I find that she was boldly acting as if she was a full agent of her mother under a Lasting Power of Attorney.

This was most clearly evidenced, by 2010, by the unchallengeable fact that:

There is no evidence that DB was fully consulted on the plans which were made for her, and if so, her views. Nor is there any evidence that any proper consideration was given to other aspects of this arrangement, such as:

It is regrettable (to say the least) that the manner in which JS usurped her mother’s authority and decision-making was not checked by independent legal advisers; indeed the problem was compounded by PK’s extraordinary conduct in acting for buyer and seller, and failing to offer independent advice to DB at the time of the sale/purchase particularly when they must have known that DB’s money was being used to fund a purchase of a property for which she was apparently to have no beneficial interest, and that her capacity was (at least) in question.

By early in 2010, the situation had become in my judgment legally wholly unsupportable; DJ Ralton rightly identified this at once when the application for deputyship was issued.

I am prepared to accept that JS embarked on this project with her mother’s best interests at the forefront of her mind, but within a short time her own best interests and those of her husband, dominated the financial arrangement.

Thus, while it was planned that DB would obviously benefit by the arrangement, by receiving care and enjoying the company of her daughter and son-in-law (as she obviously has), she had her house sold ‘over her head’ and the not inconsiderable equity in it placed (at least temporarily, until the intervention of the Court appointed deputy) out of reach, pursuant to an alleged loan agreement which she had no capacity to appreciate, let alone enter into.

By JS’s actions (purportedly on DB’s behalf) she was obviously directly financially benefiting herself and her husband. In orchestrating these extremely significant financial arrangements, JS had not condescended to any form of documentary proof; given the vulnerability of her mother, and the obvious interest of her brother, this was highly discreditable.

With trust having evaporated within the family relationship, I find that JS then became intransigent in, and unco-operative with, KB’s reasonable demands for information and documentation. She repeatedly asserted that there had been an agreement, when, as she conceded to me in oral evidence, she now accepts the possibility that she and KB may have been at cross-purposes about the arrangements.

From about August 2011, JS had the benefit of legal advice from Furness Evans, the solicitors whom she still instructs. During the period which followed she made a number of representations and assertions which were designed (or at least had the effect) of frustrating KB’s efforts to achieve proper resolution of the problem which she had created including:

To summarise, once the property transactions were concluded, and KB discovered that JS and MS had acquired legal title to Beech Avenue, I find that JS

That said, I do not regard KB as entirely blameless in this situation. In the period in which the key property transactions were being undertaken it seems to me that both JS and KB acted in a way which paid worrying indifference to the increasing mental incapacity of their mother; to that extent they both contributed to the problem.

KB’s fault lies in allowing his sister to deal with his mother’s affairs, without checking her authority to take the steps she did. He assumed that JS had a Power of Attorney, but did not check. He failed to enquire about the whereabouts of the entire proceeds of sale of Ash Grove, notwithstanding that, on his case (though I make no finding about the event), his sister’s conduct in one material respect left him feeling uneasy at the time of key discussion about these arrangements (§22 above).

And all the while, he knew that DB lacked capacity to manage her finances; he took no steps to intervene.

Unusually, but not unimportantly, both counsel invite me to depart from the general rule (that the “costs of the proceedings …shall be paid by P or charged to his estate”: rule 156) though in different ways.

I agree with them that it would be unconscionable for DB to bear the costs of these lengthy proceedings, having regard to my findings above.

I am conscious that this is not a case in which any of the parties are well-placed financially to shoulder their own responsibility for costs, let alone the costs of others; I bear in mind that both KB and JS are retired people, with access only to limited funds, in each case invested in property.

I also bear in mind, in endeavouring to do justice between these parties on this issue, that it is JS who currently provides good quality daily care for her mother. She has made life-style sacrifices to do so.

In my judgment, JS’s application for deputyship status was doomed to failure given her obvious conflict of interest; DJ Ralton’s summary dismissal of the same on the papers should have made this clear. Even if JS could be excused for launching the litigation, it is not easy to absolve her from pursuing it after August 2012, and maintaining her declared objective to be her mother’s deputy right up to the 6 September 2013. While I do not purport to adjudicate upon her associated claim for an entitlement to a share of the beneficial interest in Beech Avenue, it was not prudent for her to pursue such claims when it must have been clear to her, particularly when she had legal advice, that the manner in which she had placed her mother’s funds in her name was (at best) highly questionable, or (at worst, and in the words of MP) “financially abusive”.

As indicated above, KB is not entirely blameless, and must bear a part of his own costs.

Having regard to all of the matters discussed above, fairness and justice requires in this case that JS should pay two-thirds of KB’s costs.

I have already declared as unconscionable the prospect of DB bearing the costs of this litigation. But it is likely that had JS not pursued her own claim for deputyship, KB would have made application to the Court of Protection; had that occurred, a professional deputy may have been swiftly appointed. There would have been modest costs to DB in this process. In the circumstances, I conclude that JS should pay four-fifths of the litigation costs of MP on behalf of DB; the balance to be paid by DB.

For the reasons set out above, the order I make is that:

Given the possibility that JS will be unable to fund the costs within a reasonable time, either from the sale of the Spanish property or otherwise, I propose to allow MP to explore the mechanics of an equity release scheme to permit JS to discharge her liability for costs by way of a loan against the equity in Beech Avenue. I give MP leave to apply for such a scheme.

This relief is granted to MP on the basis that any equity released shall clearly be a loan against the equity in the Beech Avenue property, to be repaid by JS. If, at the date of DB’s death, the loan has not been repaid by JS, the loan will be an asset of DB’s estate, with the amount to redeem the loan being set off against the half-share which JS will be entitled to from DB’s residuary estate.

I give further leave to MP to investigate, and if the need arises to bring proceedings against PK solicitors for any financial loss suffered by DB.