IMPORTANT NOTICE
This judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the incapacitated person and members of their family must be strictly preserved. All persons, including representatives of the media must ensure that this condition is strictly complied with. Failure to do so will be a contempt of court.
MENTAL CAPACITY ACT 2005
IN THE MATTER OF XZ
First Avenue House
42-49 High Holborn
London WC1V 6NP
Before:
SENIOR JUDGE LUSH
Between:
XZ | Applicant |
- and - | |
THE PUBLIC GUARDIAN | Respondent |
David Rees, instructed by Charles Russell Speechlys LLP, for the applicant
Laura Davidson, instructed by the Public Guardian, for the respondent
Hearing date: 7 May 2015
JUDGMENT
Senior Judge Lush:
This is an application regarding the effectiveness of some provisions contained in a Lasting Power of Attorney (‘LPA’) for property and financial affairs.
It is not a type of application for which permission would normally be given for a judgment to be published. However, paragraph 16 of the Practice Guidance: Transparency in the Court of Protection: Publication of Judgments [2014] COPLR 78, says that “permission to publish a judgment should always be given whenever the judge concludes that publication would be in the public interest.”
I can’t imagine that the general public would have the slightest interest in this judgment, but its publication may be of interest to professionals who specialise in this area of the law and draft LPAs on a regular basis, and also to people who are considering making an LPA themselves, and for this reason I shall permit its publication.
The background
XZ is in his seventies and owns properties in several countries, but lives mainly in London. By any reckoning, he is a high-net-worth-individual.
On 4 December 2013 he executed an LPA for property and financial affairs, in which he appointed three close friends and business associates to be his attorneys. Two of them are American and one is Canadian.
He directed them to act jointly for some decisions and jointly and severally for other decisions, namely:
“My attorneys must act jointly in relation to all decisions in connection with:
- the sale or purchase of any real estate; and
- the sale of purchase of any other asset with a value in excess of CDN $3M (Three Million Canadian Dollars).
My attorneys may act jointly and severally in relation to all other decisions.”
In section 5 of the LPA he imposed some restrictions or conditions, which ran into seven continuation sheets and are the subject of these proceedings.
He set out some guidance for the attorneys to consider. He allowed the attorneys to charge for their services, and decided not to name anyone who would be entitled to receive notification of an application to register the LPA.
There were two certificate providers, Dominic Lawrance and Radhika Mehta, both of whom are solicitors with Speechly Bircham (now known as Charles Russell Speechlys), Solicitors, London EC4.
On the same day, 4 December 2013, XZ executed an LPA for health and welfare, the terms of which need not concern us.
On 23 May 2014 his solicitors applied to the OPG to register the LPAs and on 14 August 2014 the OPG informed them that the Public Guardian was refusing to register the LPA for property and financial affairs because he considered that most of the conditions imposed an unreasonable fetter on the attorneys’ power to act and were, therefore, ineffective as part of an LPA.
I have set out the restrictions and conditions in full in a schedule at the end of this judgment. The words the Public Guardian refused to register are in italics.
Summary of the conditions
Paragraph 1(A) contains a precondition that no attorney can act under the LPA unless:
the attorneys reasonably believe at the time of the decision (‘the Relevant Decision’) that XZ lacks capacity to make that decision himself; and
there is a genuine financial need for the action which is under consideration.
If this precondition is satisfied, then, before the attorneys can act, they must also cross one of two additional hurdles. These can be defined as the ‘standard threshold’ and the ‘emergency threshold’.
The standard threshold conditions are contained in paragraph 1(B)(i), namely:
a Psychiatrists’ Opinion must have been issued;
more than 60 days must have elapsed since the issue of the opinion;
the opinion must be an Uncontested Opinion; and
if a Contested Opinion had been issued previously, at least six months must have elapsed since the issue of that Contested Opinion.
Alternatively, the attorneys may act if the emergency threshold conditions are met. These are set out in paragraph 1(B)(ii) and are:
the attorneys consider that the Relevant Decision should be taken as an emergency measure for the preservation of any asset or its value, or the realisation of such value; and
the value of the asset does not exceed CDN $25M.
Paragraph (2) defines eight different terms. A Psychiatrists’ Opinion (note the position of the apostrophe) turns out to be the opinion of two psychiatrists, and it must be approved by someone known as ‘the Protector’, who initially at least is an American lawyer called SC. He and XZ have known each other since college days.
The purpose of the conditions
Dominic Lawrance, the solicitor who drafted these provisions, described their purpose as follows:
“The purpose of these safeguards is to ensure that the attorneys do not act (other than in limited emergency situations) until XZ’s incapacity has:
(a) been unequivocally confirmed by psychiatric evidence that is subject to review by the Protector; and
(b) has endured for a minimum period of 60 days.
This has been designed to prevent:
(a) the attorneys taking hasty actions with which XZ might disagree if his lack of capacity were to prove temporary; and
(b) the attorneys acting when there remained genuine scope for doubt as to whether XZ indeed lacked capacity.”
At the hearing on 7 May 2015, Mr Lawrance added that these provisions were:
“… the product of XZ’s specific instructions. He is generally loath to confer discretions and powers on other people. He likes to be ‘in the driving seat’ and was only willing to sign the LPA if these safeguards were in place.”
XZ’s counsel, David Rees, compared these provisions with those in the Regency Act 1937. Both include a requirement that a third party, who is not medically qualified, should agree with the medical evidence before the powers conferred on the delegate become exercisable. Section 2 of the Regency Act prescribes the following procedure in the event of the total incapacity of the Sovereign:
“If the following persons or any three or more of them, that is to say, the wife or husband of the Sovereign, the Lord Chancellor, the Speaker of the House of Commons, the Lord Chief Justice of England, and the Master of the Rolls, declare in writing that they are satisfied by evidence which shall include the evidence of physicians that the Sovereign is by reason of infirmity of mind or body incapable for the time being of performing the royal functions or that they are satisfied by evidence that the Sovereign is for some definite cause not available for the performance of those functions, then, until it is declared in like manner that His Majesty has so far recovered His health as to warrant His resumption of the royal functions or has become available for the performance thereof, as the case may be, those functions shall be performed in the name and on behalf of the Sovereign by a Regent.”
The application
After all the time and effort they had devoted to drafting provisions that they believed were incontrovertible, Speechly Bircham were surprised and disappointed that the Public Guardian had refused to register the LPA, so they asked him to reconsider his decision. On 10 November 2014, the Public Guardian himself, Alan Eccles CBE, replied that he wasn’t prepared to budge.
Accordingly, on 30 January 2015, XZ applied to the Court of Protection for:
A declaration that the Lasting Power of Attorney for property and financial affairs created by the applicant on 4 December 2013 does not contain provisions which:
would be ineffective as part of a Lasting Power of Attorney, or
would prevent the instrument from operating as a valid Lasting Power of Attorney.
An order requiring the Public Guardian to register the said Lasting Power of Attorney.
An order that any published judgment does not identify the applicant.
On 25 February 2015 I made an order setting out a timetable for filing and serving evidence and submissions and listed the matter for hearing on 7 May.
The Public Guardian’s witness statement
On 2 April 2015, Fatima Chandoo, a trainee solicitor with the OPG, made the following witness statement:
This statement is made pursuant to the order dated 25th February 2015 made by Senior Judge Lush.
Schedule 1, paragraph 11(3)(b) of the Mental Capacity Act 2005 (‘MCA’) states that the Public Guardian must not register an instrument where he considers that it contains provisions which would be ineffective as part of a Lasting Power of Attorney (‘LPA’), pending a determination by the court under section 23(1).
The Public Guardian considers that the provisions highlighted … are ineffective as part of XZ’s LPA for property and financial affairs and should be severed for the following reasons.
Timing of capacity assessment
Clause 1(B)(i) is ineffective as it specifies that there should be a time delay between an assessment of capacity and decision making authority given to the attorneys. As stated in the Public Guardian’s letter dated 10th November 2014 the MCA test is decision specific.
Protector
All references to a Protector require severance as the person taking this role is not identified as someone with the expertise to assess the donor’s capacity nor overrule an expert opinion.
The Protector is not an attorney, yet they are in a position to interfere with the attorneys’ duty to act in the best interests of XZ. As the Protector is not a party to the LPA they are not bound by the same duties as the attorneys.
These provisions are not saved by clause 1(B)(ii) which allows the attorneys to make decisions in an emergency as this relates only to preservation of assets and would not cover all best interests decisions.
Psychiatrists’ opinion
The requirement to obtain a medical opinion as to capacity is generally an acceptable provision in an LPA.
However, the requirements in XZ’s LPA are ineffective as the requirement contains two medical opinions before taking any action is likely to be unworkable.
The definitions of, and references to, a Psychiatrist’s Opinion, a Qualified Psychiatrist, and Uncontested Opinion and Conflicting Opinion all make reference to a Protector and/or a delay between an assessment of capacity and decision making authority therefore all require severance for the reasons set out above.
Should the court consider that the provisions referred to above are ineffective the Public Guardian requests notification that the court has severed the provisions from XZ’s LPA for property and financial affairs so that it can be registered as a valid LPA.
The hearing
The hearing took place on Thursday 7 May 2015 and was attended by:
XZ’s counsel, David Rees, of 5 Stone Buildings, who was accompanied by Dominic Lawrence and Radhika Mehta of Charles Russell Speechlys, Solicitors; and
the Public Guardian’s counsel, Laura Davidson, of No. 5 Chambers, who was accompanied by Fatima Chandoo of the OPG.
In both her skeleton argument and oral submissions, Miss Davidson reiterated the concerns raised by Miss Chandoo in her witness statement. Additionally, she suggested that some of the definitions in paragraph (2) of the provisions were unclear. She said that the Public Guardian did not consider that it was appropriate to require a certain period of time to elapse before any action could be taken under the LPA and that “the sixty day provision is also likely to be unworkable because it will prevent any action being taken for two months, which is unlikely to be in the best interests of someone lacking capacity.” And she submitted that that it would be inappropriate for an unqualified person, such as the Protector, to overrule the medical opinion of a qualified psychiatrist with respect to XZ’z capacity.
I am indebted to Mr Rees who also produced a detailed skeleton argument. To avoid repetition, I shall not summarise his submissions here, as I have adopted several of them in this judgment from paragraph 39 onwards.
The law relating to instruments containing ineffective provisions
Section 23 of the Mental Capacity Act 2005 sets out the powers of the Court of Protection in relation to the operation of LPAs. Subsection (1) provides that:
“The court may determine any question as to the meaning or effect of a lasting power of attorney or an instrument purporting to create one.”
Paragraph 11 of Schedule 1 to the Act, which is headed “Instrument not made properly or containing ineffective provision”, provides as follows:
….
Sub-paragraph (3) applies if it appears to the Public Guardian that the instrument contains a provision which -
would be ineffective as part of a lasting power of attorney, or
would prevent the instrument from operating as a valid lasting power of attorney.
The Public Guardian -
must apply to the court for it to determine the matter under section 23(1), and
pending the determination by the court, must not register the instrument.
Sub-paragraph (5) applies if the court determines under section 23(1) (whether or not on an application by the Public Guardian) that the instrument contains a provision which -
would be ineffective as part of a lasting power of attorney, or
would prevent the instrument from operating as a valid lasting power of attorney.
The court must -
notify the Public Guardian that it has severed the provision, or
direct him not to register the instrument.
Where the court notifies the Public Guardian that it has severed a provision, he must register the instrument with a note to that effect attached to it.
This is not an application by the Public Guardian to sever the provisions, but an application by XZ for the court to determine the meaning and effect of his LPA under section 23(1).
Decision
XZ’s LPA was completed on the form prescribed in the Schedule to the Lasting Powers of Attorney, Enduring Powers of Attorney and Public Guardian (‘LPA, EPA & PG) (Amendment) Regulations 2009 (SI 2009 No. 1884), which are soon to be superseded.
On 26 March 2015 the LPA, EPA & PG (Amendment) Regulations 2015 (SI 2015 No. 899) were laid before Parliament, and they prescribe two new forms of LPA, which will come into force on 1 July 2015.
There will be a new section 5 in the LPA for property and financial affairs (though not in the LPA for health and welfare), which is headed “When can your attorneys make decisions?” The donor is required to tick one of two boxes:
“As soon as my LPA has been registered (and also when I don’t have mental capacity).”
“Only when I don’t have capacity.”
Beneath the words “only when I don’t have capacity” is a message, which reads like a government health warning:
“Be careful - this can make your LPA a lot less useful. Your attorneys might be asked to prove you do not have mental capacity each time they try to use this LPA.”
Essentially, this warning is what this case is all about.
XZ wants his attorneys to act only when he lacks capacity. In his LPA he has described in intricate detail the circumstances in which he can be identified as no longer having the capacity to make a relevant decision, whereupon his attorneys may make the decision on his behalf and in his best interests.
As the new prescribed form of LPA for property and financial affairs suggests, these provisions make his LPA a ‘lot less useful’, though whether they are ‘ineffective’ as part of an LPA is an entirely different matter.
XZ acknowledges that his LPA will be less effective because of these provisions but, nevertheless, he wishes them to remain as an integral part of the registered instrument for his own reassurance and peace of mind. Some people may think that this is unwise, but it is his will and preference and it should be treated with respect. The Public Guardian has no right to make a paternalistic judgment on his behalf and decide that it would be in his best interests for these provisions to be severed.
I agree with Mr Rees’s submission that:
“With respect to the Public Guardian, it is no part of his statutory duties to police the practicality or utility of individual aspects of an LPA. In the context of section 23 and Schedule 1, paragraph 11 of the MCA 2005 the phrase “ineffective as part of a lasting power of attorney” clearly means “not capable of taking effect, according to its legal terms as part of an LPA.” Examples of provisions which would be ineffective as part of a power of attorney would include:
(a) a provision which purported to permit the attorney to make gifts which go beyond the statutory restrictions found at section 12 MCA 2005.
(b) a provision which purported to go beyond what a person can do by an attorney (such as make a will or vote).
(c) a provision which purported to permit the attorney to consent to a marriage on behalf of the donor (see MCA section 27(1)(a).
Neither the court nor the Public Guardian are concerned with whether a restriction that does not contravene the terms of the MCA 2005 may pose practical difficulties in its operation.”
The Public Guardian’s function under paragraph 11 of Schedule 1 to the Act is limited to considering whether the conditions and restrictions are (a) ineffective as part of an LPA or (b) would prevent the instrument from operating as a valid LPA.
If he concludes that they cannot be given legal effect, then he is under a duty to apply to the court for a determination of the point under section 23(1). Otherwise he has a duty to register the power.
Neither Miss Chandoo’s witness statement nor Miss Davidson’s submissions have identified any specific provision in the Mental Capacity Act 2005, or the LPA, EPA and PG Regulations, or the common law of agency that has been infringed by the provisions in XZ’s LPA.
For these reasons, and pursuant to section 23(1) of the Act, I declare that XZ’s LPA does not contain any provisions which:
would be ineffective as part of an LPA; or
would prevent the instrument from operating as a valid power of attorney.
I also order the Public Guardian to register the LPA.
SCHEDULE
Subject to the following provisions, no attorney (which shall for the purposes of these restrictions include any replacement attorney) shall have authority to take any decision under this Lasting Power of Attorney unless:
My attorneys reasonably believe at the time of the decision that I lack capacity to take the decision (‘the Relevant Decision’) myself and that there is a genuine financial need for the action which is under consideration; and
Either:
a Psychiatrists’ Opinion has been issued, more than 60 days have elapsed since the issue of that opinion, the opinion is an Uncontested Opinion and, if a Contested Opinion has been issued previously, at least six months have elapsed since the issue of that Contested Opinion; or
my attorneys consider that the Relevant Decision should be taken as an emergency measure for the preservation of any asset or its value or the realisation of such value, and the value of the asset does not exceed CDN $25 million (twenty-five million Canadian dollars).
For the purposes of these provisions:
a “Psychiatrists’ Opinion” is an opinion of two Qualified Psychiatrists that I lack the capacity to take the Relevant Decision;
a “Qualified Psychiatrist” is a psychiatrist who has practised as such for at least ten years and;
is certified by the Royal College of Physicians and Surgeons of Canada;
is certified by the American Board of Psychiatry and Neurology; or
who has been admitted as a member of the Royal College of Psychiatrists with the MRCPsych post-nominal qualification and has been issued with a Certificate of Completion of Training by the General Medical Council.
Qualifying Psychiatrists shall be deemed to have opined that I have or, as the case may be, lack the capacity to take the Relevant Decision if they have opined;
that I have, or as the case may be, lack the capacity to take any decisions whatsoever, or
that I have, or as the case may be, lack the capacity to take a decision to enter into a High Value Transaction;
a “High Value Transaction” is a transaction relating to an asset with a value in excess of CDN $50 million (fifty million Canadian dollars);
an “Uncontested Opinion” is a Psychiatrists’ Opinion which has Protector Approval, and where no Conflicting Opinion has been issued following the issue of the Psychiatrists’ Opinion;
a “Contested Opinion” is a Psychiatrists’ Opinion which does not have Protector Approval or where a Conflicting Opinion was issued following the issue of the Psychiatrists’ Opinion;
a Psychiatrists’ Opinion has “Protector Approval” if the Protector has reviewed the Psychiatrists’ Opinion and any reports of Qualified Psychiatrists prepared in connection with that opinion and has confirmed in writing that he agrees with the opinion, including (if applicable) any statement made in that opinion that I lack the capacity to take any decisions whatsoever, or that I lack the capacity to take a decision to enter into a High Value Transaction; provided however that a Psychiatrists’ Opinion shall be deemed to have “Protector Approval” (if on the date of issue of the opinion no person holds office as the Protector;
a “Conflicting Opinion” is an opinion of two Qualified Psychiatrists that notwithstanding the Psychiatrists’ Opinion, I do in fact have the capacity to take the Relevant Decision;
“the Protector” means:
SC or if he is dead or incapable of acting
a successor to SC, or to any other person who may hold office under this paragraph (2.9), appointed by me in writing at any time (provided that I am capable of making such appointment); or if no such successor has been appointed or no such appointed successor is living and capable of acting;
a successor to SC, or to any other person who may hold office under this paragraph (2.9), appointed by SC himself in writing at any time (provided that he is capable of making such appointment); or if no such successor has been appointed or no such appointed successor is living and capable of acting;
a successor to any person who may hold office under paragraph (2.9.2) above (provided the person is capable of making such appointment); or if no such successor is living and capable of acting;
a successor to any person who may hold office under this paragraph (2.9), appointed in writing by the last person to hold office under paragraph (2.9.3) above (provided the person is capable of making such appointment) on the basis that any appointment of a successor to SC shall take effect in the event that SC dies or becomes incapable of acting, and in the event that a successor to SC dies or becomes incapable of acting a further successor shall take office in his place in accordance with the above provisions.
My attorneys must:
keep a record of all decisions made by them on my behalf;
(unless I am unconscious) inform me of any decision which they have taken, or are proposing to take, and allow me to express my views on the matter (to the extent that I am able to do so), before such decision is implemented; and
(unless I am unconscious) inform me of any decision which they have implemented, promptly after it has been implemented.
If any person holding office as the Protector wishes to take his own legal and/or psychiatric advice in connection with paragraph (2.7) above then the reasonable costs of such advice shall be reimbursed by my attorneys.