Matters considered

The law

…..

8.1 Section 64(1) of the Mental Capacity Act 2005 provides that “‘ trust corporation’ has the meaning given in section 68(1) of the Trustee Act 1925 ”;

8.2 Section 68(1)(18) of the Trustee Act 1925 provides that “ ’Trust corporation means the Public Trustee or a corporation either appointed by the court in any particular case to be a trustee, or entitled by rules made under subsection (3) of section four of the Public Trustee Act 1906 to act as custodian trustee. ” (Footnote: ²)

8.3 The relevant rules are the Public Trustee Rules 1912 (as amended).

8.4 Rule 30(1) in its current form provides that “ The following corporations shall be entitled to act as custodian trustees: -

(b) any corporation which:-

(i) is constituted under the law of the United Kingdom or of any part thereof, or under the law of any other member State of the European Economic Community or of any part thereof;

(ii) is empowered by its constitution to undertake trust business (which for the purpose of this rule means the business of acting as trustee under wills and settlements and as executor and administrator) in England and Wales;

(iii) has one or more places of business in the United Kingdom; and

(iv) is-

a company incorporated by special Act of Parliament or Royal Charter, or

a company registered (with or without limited liability) in the United Kingdom under the Companies Act 1948 or under the Companies Act (Northern Ireland) 1960 or in another Member State of the European Economic Community and having a capital (in stock or shares) for the time being issued of not less than £250 000 (or its equivalent in the currency of the State where the company is registered), of which not less than £100000 ( or its equivalent) has been paid up in cash, or

a company which is registered without limited liability in the United Kingdom under the Companies Act 1948 or the Companies Act (Northern Ireland) 1960 or in another member State of the European Economic Community and of which one of the members is as company within any of the classes defined in this sub-paragraph.”

8.5 The Rules are treated as also including companies registered under the Companies Act 1985 and the Companies Act 2006. (Footnote: ³)

“ The court will decide whether the proposed deputy is reliable and trustworthy and has an appropriate level of skill and competence to carry out the necessary tasks .”

Background factors

“Such a corporation can be a wholly owned subsidiary of another company, or its shares may be held by an LLP. It may be part of a group structure but it is a separate legal entity (emphasis added) and may hold assets in England, Wales and overseas.”

The importance of the separate legal identity of the trust corporation is underlined by further reference at paragraph 3 of the Note:

“Trust corporations are separate legal entities to their parent partnership or LLP, and so carry a separate risk.”

Para 3: “A trust corporation is designed to increase flexibility and improve services for clients. By creating a trust corporation, you can streamline the administration of estates and trusts to provide greater flexibility in the day-to-day administration of the files that it handles.

Para 3.2: “From the client’s perspective, the benefits of appointing a trust corporation include:

Court of Protection procedures

COP4 Declaration

“Anybody considered for appointment as a property and affairs deputy will need to sign a declaration giving details of their circumstances and ability to manage financial affairs. The declaration will include details of the tasks and duties the deputy must carry out. The deputy must assure the court that they have the skills, knowledge and commitment to carry them out.”

Security bond

Procedural history of the applications

“ It appears to the Court that, to be satisfied that a trust corporation is a fit and proper legal person to be appointed as a property and affairs deputy and to set the level of security bond if it makes the appointment sought, the Court needs to address the following issues:

“ b. whether the trust corporation has been registered with/assessed by…the bond provider;

c. Whether the aggregate value of the estates for which the trust corporation acts (if any) falls within the upper limit set by its professional indemnity insurers;

d. Any other matter which the Public Guardian considers should be brought to the attention of the Court concerning the suitability of the trust corporation to act as deputy;

e. If so advised, the level of the bond he invites the Court to set.”

Evidence relevant to all the applications generally

“26. …. A TC will be treated the same as any other professional deputy and will be required to meet any standards set by PG.

27. Once a deputy is appointed, the PG will contact the new deputy. The PG operates two supervision levels: general and minimal. New deputies get a “general” level of supervision for the first year. After the first year, a property and affairs deputy managing an estate of less than £12 000 will move to a minimum level of supervision. The different levels have different supervision costs and different reporting requirements with deputies on a general level of supervision required to provide a more detailed report than those on a minimum level of supervision.

28. The professional deputy team will contact new deputies who have not had any deputyship cases before to conduct a settling in call to discuss the case including the setting up of deputyship accounts.

29. The professional team review annual reports for all cases, this details income and expenditure and also decisions made on behalf of the client. Along with the annual report all professional deputies must submit an OPG105 detailing the costs taken and estimated costs for the next reporting year. Where costs taken exceed fixed costs, and where the court order allows, the professional team requests copies of the Senior Courts Costs Office cost certificates and reconcile these against the costs charged.

30. The professional team review the bonds and professional indemnity insurance upon review of the annual reports to ensure the client’s assets are protected. The professional team monitor the compliance with PG’s requests for information including annual reports and costs certificates taking action as necessary including discharge.

31. The professional team also review COP visitors’ reports following client and assurance visits. They will address any issues or concerns with the deputy and monitor their compliance with requests, and monitor the deputy’s adherence to the professional deputy standards, practice directions and practice notes.”

27. The Public Guardian’s position statement gives (at paragraph 23) an unequivocal statement of his position in respect of trust corporation deputies: he “wishes to note that there are clear benefits to the appointment of a TC, most notably that of continuity, ie there are no personal appointments and therefore, no costly applications where a deputy retires.”

28. There is no suggestion in any of the statements or submissions made by the Public Guardian that his Office either does or could conduct any checks as to the suitability of a trust corporation prior to appointment as a deputy.

29. There has also been filed at Court information from two bond providers.

29.1 Exhibited to a COP24 statement by Kayleigh Smith [ tab 15 ] is a single page document said to have been provided by Aviva, who underwrite deputy bonds provided through Deputy Bond Services. The document is not signed and bears no other mark of authentication by Aviva but sets out that

“Our assessment on the Trust Corporation is two-fold:

Therefore we check the following:

[After reference to the Public Trustee Rules]…Therefore I check to see whether the company is

“a. registered in the UK and therefore has one or more places of business within the UK;

b. is empowered by its constitution to undertake trust business;

c. has the appropriate paid up share capital.”

If these criteria are met, then I am satisfied that they are legally able to be appointed as Deputy, so from the OPG/Court’s perspective they are acceptable. If they failed to meet this criteria I would question the validity of their appointment…..

This is a risk assessment for us to consider the acceptance of a bond for a validly appointed Trust Corporation. To help understand we ask the following questions:

These questions enable us to clearly establish and document the legal relationship with the firm of solicitors and the Trust Corporation. We provide a bond facility for the firm with the facility limit based (in part) on the amount of the P.I. cover purchased. By ensuring that there is this legal relationship and that the P.I. covers the Trust Corporations this ensures that the bond issued for the Trust Corporation attaches to the firm and the P.I. in the same way that an individual solicitor being personally appointed would have. We would not wish to be in a weakened recovery position when providing a bond for a Trust Corporation than we would for an individual .”

29.2 In a witness statement by Paul Philand, Global Head of Surety for RKH Specialty, dated 18 ^th September 2017 [ tab 16 ] the approach of Howden Group (UK) Limited is set out as follows:

“4. We have always taken the view that the Court decides on whoever is suitable to act as deputy having considered the facts before them and once that decision is made we must arrange a bond for that entity or individual. However where we might have reservations we would share these with the Court/Office of the Public Guardian. We have never seen the need to share any such reservations on any SRA regulated trust corporation.

5. … were we … to “grade” the level of risk associated with the different types of deputy that the Court appoints, then these directly or indirectly SRA regulated trust corporations would be amongst the lowest risk by comparison to the types of deputy, in our view.

6. I have been asked what checks, if any, Howden do before providing a bond. As we are committed to providing bonds whenever the Court appoints a deputy we do not do any before the bond is provided. However, an informal arrangement exists whereby we then do some rudimentary record checking. For SRA regulated trust corporations we check that the trust corporation appears on the SRA list and that (at least the majority of) the directors are solicitors and listed.

7. We do not ask for copies of the solicitors’ insurance certificate, relying on the fact that the SRA will have ensured that the solicitors are insured. For non-solicitor trust corporations we do ask whether they have professional indemnity insurance in place covering their work as deputies. We also do some further rudimentary checks for non-solicitor trust corporations.

8…..we are fully aware of the strict regulations and requirements the SRA impose on law firms and the onerous (to underwriters) nature of those rules. As such we feel if a solicitor’s deputy work is under the SRA “control”, we are content.

9. We have never raised any reservations with the Court on any directly or indirectly SRA-regulated trust corporations.”

30. When Deputy Bond Services was the MOJ contracted supplier of bonds, it provided to the court confirmation of trust corporations in respect of which it had conducted its checks with no concern arising. The Court informally referred to this list of “checked” trust corporations as an indication of appropriateness for appointment. With the different approach of the current approved supplier, no similar reference is now available to the Court.

Conclusions:

31. There is presently no system in place as between the Court, the Office of the Public Guardian and the Ministry of Justice’s approved bond supplier on which the Court can rely as to the suitability of a trust corporation for appointment as deputy prior to making such appointment. A trust corporation can apply to be on the PG’s panel of deputies, but there is no ‘panel’ of trust corporations which have demonstrated compliance with legal requirements to act. Information necessary to satisfy the Court as to suitability must therefore be ’built into’ the application process itself.

Information which the Court has identified as necessary

Whether a trust corporation can lawfully act as such :

32. The Court needs to be satisfied that the applicant trust corporation meets the four conditions of Rule 30 of the Public Trustee Rules 1912 as set out above.

33. The Public Guardian’s position is that “the PG’s Professional Deputyship Team are not legal experts on the constitution of TCs and it is submitted that the PG would be in danger of overstepping his statutory remit in carrying out such assessments, especially if a wrong conclusion is reached with potential claims for loss of work.” [ tab 2 paragraph 10]

34. In each of the applications currently before the Court the trust corporation has been required to submit a copy of its Articles of Association. It is said on behalf of the eleven trust corporations that to do so each and every time they make an application for appointment would be unduly burdensome and costly. In any event, it is neither appropriate nor feasible for the Court of Protection to decide matters of constitution of a trust corporation.

35. How then is the Court to be satisfied that a trust corporation can lawfully act as such? In my judgment, the only feasible and proportionate way for the Court to satisfy itself of this basic requirement is to require self-reporting, with a declaration of truth, in the same way that other kinds of deputy are required to self-report their own appropriateness to act as deputy.

36. A trust corporation applying to be appointed as property and affairs deputy should firstly make a declaration, with a declaration of truth, that it can lawfully act as such; and secondly, give an undertaking to notify the Public Guardian forthwith if that state of affairs changes at any time throughout the duration of the appointment.

37. In the event that anything in the application papers leads the Court to require further confirmation of a trust corporation’s compliance with legal requirements to act as such, the appropriate approach of the Court would be to direct a report on that issue from the Public Guardian, pursuant to section 49 of the Mental Capacity Act 2005.

Whether the internal management supervision and controls of the trust corporation are appropriate :

38. The trust corporations submit that

“ provided that they are able to manage and administer P’s funds properly, and in accordance with their statutory and fiduciary obligations, trust corporations should be free to adopt their own internal management procedures (just as individual professional deputies and public authorities are). It is not for the court to seek to impose a standard set of practices on trust corporations….. Parliament simply provided that any trust corporation could be appointed as a property and affairs deputy if the court considered it to be in P’s best interests to do so.”

39. It is of course not the role of the Court to impose a set of internal practices. It is both undesirable and unfeasible for the Court to attempt to assess the working systems of a trust corporation but how is the Court to know if a trust corporation “is able to manage and administer P’s funds properly and in accordance with their statutory and fiduciary obligations”?

40. Once a trust corporation is established, and has been through a cycle of assurance visits, the Public Guardian could potentially be asked to provide information to the Court but this would be an onerous, expensive and time-consuming approach on a case by case basis. Moreover, the Public Guardian’s assurance visits cannot offer the Court any information in respect of a newly created trust corporation which has as yet no track record of handling deputyships.

41. In my judgment, the appropriate and proportionate response, in line with the existing COP4 procedure, is for the Court to require an undertaking from an appropriate officer of a trust corporation applicant to comply with the Public Guardian’s published standards for professional deputies. (Standard 3 sets out an expectation to “Maintain effective internal office processes and organisation”. Standard 4 requires possession of “the skills and knowledge to carry out the duties of a deputy.”)

42. No arguments against this approach were raised on behalf of the trust corporations.

43. The Public Guardian accepts the suitability of this approach for trust corporations of the type involved in these proceedings (ie linked to legal practices) but raises concerns about other types of trust corporation – specifically, charities and banks.

44. Mr Rees considered it essential that trust corporations not associated with solicitors firms should not be subjected to a lower standard, and I agree with him. The Public Guardian’s standards do not prescribe processes; they set out end-result competencies. The purpose of them is to secure the interests of the person whose funds are being managed. In my view an undertaking to comply with the Public Guardian’s standards for professional deputies may properly be expected of any type of trust corporation applicant. If trust corporations other than of the type in these proceedings (ie linked to legal practices) considered themselves in difficulty in giving such an undertaking, it would be appropriate for the Court to ask for further explanation, and a decision as to appropriateness for appointment taken on a case by case basis in the light of any responses.

External regulation other than by the Public Guardian

45. Why should the Court consider external regulation relevant to suitability for appointment as a deputy? The Court’s concern is to protect the interests of the incapacitated person. The most likely risk to an incapacitated party from the actions of a property and affairs deputy is misappropriation/loss of that person’s assets. Any person or body appointed as deputy is subject to the Court’s power to terminate the appointment and to supervision by the Public Guardian, and the Court routinely appoints as deputy lay people who will be subject to no other regulation. If misappropriation/loss occurs, the prospects of recovering the misused funds are independent of regulation. Regulation is reactive – if a problem arises, a regulated person or body may be subject to sanctions but they are likely to come after the event. What assurance then does external regulation provide?

46. Where a lay, and therefore unregulated, deputy is appointed, the deputy is most commonly a family member or acquaintance of the protected person. Such a deputy is not usually authorised to charge for providing the functions of deputyship: he or she performs their duties for free, entitled only to claim reasonable expenses. In contrast, a trust corporation deputy is unlikely to have been previously involved with the protected person and generally anticipates authorisation for the charging of fees. Whereas a lay deputy is likely to be appointed only for a small number of protected persons, a trust corporation is likely to seek appointment for many protected persons, thereby aggregating a large risk.

47. Adherence to a regulatory framework provides a marker of standards; and the possibility (threat?) of sanctions for failure to meet prescribed standards will commonly operate proactively as an incentive to compliance. Regulation is not a guarantee of anything but it is, as Mr Rees describes, “a further check on what the deputy does….[because there is] someone else sitting on their shoulder.” The court must of course consider every case on its facts but where there is a requirement to comply with appropriate external regulation, the Court can derive assurance of the likelihood that a potential deputy will behave in an appropriate fashion to meet the best interests of P; and if he does not, that other agencies are likely to step in.

48. In respect of the applications currently before the Court, the relevant regulatory body is the Solicitors Regulatory Authority. Under chapter 12 of the SRA Code of Conduct a trust corporation owned by a solicitors practice may apply for SRA authorisation but is not required to be authorised as long as:

Seven of the trust corporations involved in these proceedings are authorised by the SRA; four are not. One was formerly but is not presently.

49. In the context of optional SRA regulation of a trust corporation, Mr. Rees introduces (at paragraph 28 of his position statement) the term ‘separate’: “a trust corporation owned by a solicitors practice does not require separate SRA authorisation if…” The implication seems to be that, where the individuals involved in the trust corporation and the underlying law firm are themselves subject to SRA regulation, then ‘separate’ SRA regulation of the trust corporation offers no additional benefit or assurance to the Court. Given the separate legal identity of the trust corporation, that did not seem to me an obvious conclusion:

a. In fact, the Directors of the trust corporations in these proceedings are not all solicitors;

b. When a Director of a trust corporation is acting as such, does regulation in another role apply? What if the ownership of the trust corporation changes?

50. Mr Rees points to “SRA requirements for the supervision of employees and non-solicitors working in an SRA regulated institution” to the effect that, where a solicitors’ firm employs non-solicitors, they are indirectly SRA regulated because they must be supervised by a solicitor. If a non-solicitor employee acts in a way which is inappropriate for an SRA regulated body, the SRA can bar their employment (by the particular and any other SRA regulated body.) (Footnote: ⁶) It seems to me however that this still does not provide a complete answer because one of the trust corporations does not require a solicitor who retires from the LLP to retire as Director of the trust corporation.

51. These considerations led to the identification in the hearing of three categories of trust corporation amongst the applicants:

52. The questions directed to the SRA after the hearing were intended to clarify to the Court the implications of regulation for each of these categories.

53. The first question related to Category 1 trust corporations. It was prefaced with a brief introduction:

“The parties understand that where a trust corporation is itself a recognised or licensed body, the SRA have both a supervisory responsibility over the body and various powers to take regulatory action against it to protect the public as may be necessary.”

The SRA was then asked to

“briefly outline the responsibilities and powers of the SRA in this regard.”

55. The second question related to Category 2 trust corporations, and was set out as follows:

“It is the case that many trust corporations associated with solicitors’ firms are not recognised or licensed but do only have directors who are solicitors. The Court is trying to understand what effect that situation has on the SRA’s supervisory jurisdiction and powers:

56. The third question put to the SRA was a generalised invitation to distinguish the regulatory regimes applicable to Category 1 and Category 2 trust corporations:

“Does the SRA have any general comment to make on the benefits to the public of a trust corporation being itself regulated or licenced or the risks of one not being?”

57. The SRA response (in its letter dated 30 ^th October 2017) uses different terminology to the questions, referring to “where a trust corporation is an authorised body.” Mr. Rees and Mr, Drapkin address this as follows:

“… trust corporations that are directly regulated by the SRA can themselves be either alternative business structures or have a structure that is regulated in the same way as a traditional legal practice would be. If the former then when regulated they are regulated as ‘licensed’ bodies and if the latter they are ‘recognised’ bodies. The SRA refers to both types of regulated body as ‘authorised’ bodies and therefore the word can be used to mean any trust corporation that is directly regulated by the SRA.”

58. From the SRA response, it is possible to extract the following propositions:

a. SRA responsibilities : Section 1 of the Legal Services Act 2007 requires the SRA “to act in the public interest and protect users of legal services.”

b. SRA powers : Where its regulatory authority is engaged, the SRA can

59. In respect of Category 1 trust corporations : the SRA will “regulate the entity as well as the solicitors working in it” and so its powers include the ability to “impose conditions on … at any time to restrict or stop the firm from carrying out an area of work, limit the activities of a manager or employee to allow us to comply with … regulatory objectives (Rule 9 of the SRA Authorisation Rules 2011).”

60. In respect of Category 2 trust corporations , the SRA letter states that “Where a solicitor is involved in a non-authorised business they are not able to participate as a practising solicitor but are practising as a non-solicitor. Although we do not regulate the business we regulate the individual solicitor. As they are not practising as a solicitor but are outside of practice only certain parts of the [SRA Code of Conduct] will apply.” The regulatory position in such circumstances is as follows:

61. The SRA response also addresses various other protective aspects of regulation:

62. So, in terms of regulatory obligation, a comparison of category 1 and category 2 trust corporations seems to be as follows:

Equivalencies:

Differences:

63. To what extent do these equivalencies and differences translate into material difference for the position of the protected person (which is the Court’s concern)?

a. Direct/indirect intervention : The trust corporations submit that, if a category 2 trust corporation undertakes that they have no employees (Footnote: ⁷) and no non-solicitor directors, then the SRA’s lack of direct authority over a category 2 trust corporation should not be a concern because “the composite protection of the SRA regulating the individual solicitor directors of the trust corporation and the SRA enjoying its full powers over the associated legal practice is sufficient for the Court to have confidence in the regulatory regime.” I agree, but it does depend on the undertaking being given.

b.Limited application of Principles and Code : The trust corporations submit that the application of Principles 2 and 6, together with the SRA’s express confirmation that it would consider a serious irregularity in trust corporations’ accounts to be a breach of those principles, is sufficient to assure the Court that “the most significant danger to the incapacitated person is well covered by the regulatory position.” I agree. However, for that to be the case, it must be that all directors of the trust corporation are solicitors.

c.Investigatory powers : The trust corporations submit that applicable SRA powers, coupled with the application of the Disciplinary Procedure Rules, are sufficient to police potential breaches of compliance obligations. Given that these obligations are essentially of reactive use, and there will be other avenues for pursuit of misappropriated funds in the security bond and in insurance cover, I agree.

d. Indemnity insurance cover : Where the SRA requires the provision of indemnity cover, the Court can be confident that there will be an automatic check of continuous cover every year. The trust corporations submit that a category 2 trust corporation could give an undertaking to the court that it is covered by the indemnity insurance of its associated legal practice, on the same terms as that practice. In my judgment, there should also be given an undertaking to report to the Public Guardian any change in that position, and the maintenance of such insurance included as part of the Public Guardian checks in annual review.

e. Funds protection under the Solicitors Act 1974 : Mr Rees points out that the Solicitors Act does not provide direct protection for funds held by solicitors. Rather Solicitors Accounts Rules 2011 are made by the SRA pursuant to section 32 of the Act. Those Rules do not apply in full to funds held by solicitor deputies in any event: “Rule 8.1 of the SAR 2011 provides that a solicitor deputy appointed by the Court of Protection must comply with the “appropriate statutory rules and regulations”, various of the SRA Principles and some discrete provisions of the SAR 2011. If the deputy does so it will be deemed compliant with the SAR 2011.”

The trust corporations accept that the “appropriate rules and regulations” include the Court of Protection Rules, the Mental Capacity Act 2005, the Code of Practice and the OPG Standards for Professional Deputies. They submit that in the case of both category 1 and 2 trust corporations, there should already be compliance with these requirements and with SRA Principles 1,2 and 6 and therefore “the remaining effect of the application of the SAR 2011 …would be small and…of only marginal benefit.” I agree.

f.Solicitors Compensation Fund : The SRA provides a discretionary scheme which may make grants of up to £2million in circumstances where a defaulting practitioner, employee or manager has misappropriated funds and this has not been covered by their insurance.

The trust corporations submit that, where the practical management of the incapacitated person’s estate is carried out by the legal practice associated with the category 2 trust corporation (as they suggest could be the subject of an undertaking), it is “likely (although perhaps not inevitable)” that any default will be “by some person acting in the course of the associated legal practice.” Noting Rule 3.1 of the Solicitors Compensation Fund Rules (which provides that the applicant does not have to be the defaulting practitioner’s client) the incapacitated person with a category 2 trust corporation as deputy would therefore have a right to apply to the Fund in an appropriate case.

The acknowledgment that it is not “inevitable” that the proposed undertaking would cover all potential defaults gives reason for caution. However, taking a pragmatic view as to the requirements of most deputyships, I am satisfied that such undertaking is sufficient to assure the Court that there is very little material difference for the protected person as between category 1 and category 2 trust corporation deputyships in the context of recourse to the Solicitors Compensation Fund. The proposed undertaking however should be a requirement for category 2 trust corporations.

g.Routes of complaint : Similarly, if there is assurance that all management is being conducted by the associated legal practice, and all directors of the trust corporation are solicitors, then there is likely to be no material difference to a protected person in the avenues of complaint available where the deputy is either category 1 or category 2.

64. Conclusion : I am satisfied that the Court can be satisfied that there is adequate external regulation of a trust corporation for it to be suitable for appointment as a deputy if an authorised person undertakes on behalf of the trust corporation

EITHER that the trust corporation is itself authorised by the SRA;

OR that:

a. all the directors of the trust corporation are solicitors and it employs no one (save to the extent that it employs a company secretary); and

b. the trust corporation will retain its associated legal practice to carry out all practical work in relation to the management of the incapacitated person’s property and affairs; and

c. the trust corporation is covered by the professional indemnity insurance policy of its associated authorised legal practice on the same terms as that practice

AND that the trust corporation will inform the Public Guardian immediately if any of these things change.

65. That leaves still to be considered Category 3 trust corporations , including those which are not linked to legal practice at all. The Public Guardian points out (at paragraph 17 of his position statement) that where a trust corporation is run by a charity, the Charity Commission is the relevant regulatory body. Where a trust corporation is linked to a bank, there will be financial regulatory authorities. Within these proceedings, the scope of regulation of any such bodies has not been considered. If the protective effect of regulation by bodies other than the SRA is broadly comparable, it is likely that the Court will be similarly satisfied as to the appropriateness of the appointment, although to establish such satisfaction there may need to be on the next occasion when such appointment is sought a direction to the Public Guardian to provide a report pursuant to section 49 of the Mental Capacity Act 2005.

66. The Public Guardian further points out the possibility that there may be trust corporations created in relation to whom there is no supervisory body at all, ie with no one “sitting on their shoulder.” The Court must consider every application on its merits but I agree with the Public Guardian’s submission that “the Court should treat non-regulated [trust corporations] with caution.” Where there is no external regulation, the Court is likely to require the provision of further information (such as is “built in” to the standard application process) before the application can be determined.

67. The Public Guardian suggests that (by analogy to the matters identified as relevant to setting the level of the security bond in the case of Re H, Baker v H & Another [2009] WTLR 1719 ) the Court should consider:

a. the various list of qualities which case law has already identified as pertinent to suitability for appointment as deputy (including ability to discharge the functions of deputyship, degree of contact with P, relationship between the proposed deputy and P, where the proposed deputy is based, whether other demands on the proposed deputy will allow time for properly acting as deputy, age and health of proposed deputy, financial good character, previous experience of the role of deputy/attorney/executor/trustee, and other relevant skills);

b. the risk to P;

c. the size of the business;

d. length of operation;

e. whether the business involves any other public work (eg appointeeship);

f. the number of directors (and information about them); and

g. level of indemnity insurance.

68. Whilst this list should not be considered exhaustive, and additional factors may be relevant in any particular case, I agree that these factors are all likely to be relevant. The unregulated trust corporation applicant may be required to address them in the form of a COP24 statement by an authorised director; and the Court may direct the Public Guardian to prepare a s49 report to assist the Court.

The total amount of protected persons’ assets and funds held; in whose name and in what accounts such assets and funds are held; AND the level of insurance cover which the trust corporation has.

69. In respect of how protected persons’ assets are held, Mr. Rees summarises that “broadly speaking investments are held in the name of the trust corporation as deputy for the relevant individual. There are differences in practice as to the holding of cash, with some use being made of the underlying law firm’s client account to hold some sums.” The Public Guardian has not made any submissions on this point, which I would regard as within the ordinary remit of his supervisory functions. In terms of how the Court considers these things, the considerations and conclusions above in respect of internal management supervision and controls, and external regulation, apply.

70. The concerns about the total amount of assets held and the level of insurance cover maintained were set out separately in the directions order but raise overlapping issues and were considered together at the hearing.

71. All of the trust corporations in these proceedings are covered by insurance policies maintained by the underlying solicitors’ practice; and all of the policies comply with the SRA Minimum Terms and Conditions of Professional Indemnity Insurance. In fact, all of the trust corporations in these proceedings maintain additional insurance cover in similar terms beyond the SRA minimum but to differing levels. Mr Rees summarised the SRA Minimum Terms and Conditions as requiring “a minimum of £3m cover for each claim for incorporated solicitors’ practices and alternative business structures and £2m for sole practitioners and traditional partnerships;” and set out the provision (at paragraph 2.5) for the insurer to aggregate claims arising from related matters.

72. The concern of the Court may be expressed by consideration of a hypothetical situation:

73. The aggregate of deputyship funds held by the various trust corporations represented in these proceedings covers a very wide range, from zero (where a trust corporation is newly established and has yet to be appointed) to many millions of pounds.

74. How realistic is the Court’s concern about aggregation? It should be remembered that the same issue arises where the Court appoints a range of named individual solicitors within the same firm as deputies. Arguably, it is of less concern where the deputyship is held by the law firm’s associated trust corporation because of the (various) internal control structures adopted in respect of who is authorised to act on behalf of the trust corporation and in what transactions.

75. It is submitted on behalf of the trust corporations that paragraph 2.5 of the SRA Minimum Terms has not yet been subject to judicial consideration. Mr Rees referred to the authorities of AIG Europe Ltd v. OC320301 LLP & Others [2016] EWCA Civ 367 and Lloyds TSB General Insurance Holdings Ltd v. Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43 (HL) as offering some reassurance that the kind of losses which the Court is concerned with could not be aggregated. He says that, where the assets of protected persons are misappropriated by a deputy, in reality it will most probably have been done by lots of separate acts, not an individual act; and where the deputy misappropriates funds belonging to person A and also to person B, it is at least arguable that those wrongful acts are not related.

76. Mr. Rees’ submissions may be optimistic (as is to be expected). At the very least, paragraph 2.5 of the SRA Minimum Standards leaves the risk of aggregation open. Nonetheless, it should be remembered that the provision of insurance is itself is a protective measure, and the aggregation risk should be considered in the context of the overall package of protective measures.

77. It may in theory be possible for the Court to address this by requiring insurance cover which expressly excludes any power to aggregate but there is no information before the Court as to whether such policies are in fact available. Moreover it seems likely that, even if they are available, the costs of such cover would be higher, and the extra burden of such costs would ultimately be borne by protected persons as clients of the insured. More practically, the aggregation risk can be reduced if the level of insurance cover is, rather than the minimum requirement, a figure more proportionate to the total assets held. In fact, this approach has already been adopted by all of the trust corporations in these proceedings.

78. The Court has heard no submissions as to the “adequacy” of insurance levels over and above the SRA required minimum. In my judgment it is feasible and practicable for the Court to check adequacy of insurance solely in the context of a single claim relative to the size of the estate in respect of which deputyship is being considered. It is not, however, feasible or practicable for the Court to assess adequacy of insurance cover in the context of total assets under the management of the proposed deputy and aggregation risk. Any view taken today would be out of date next week because of new appointments made and old appointments ending; and the additional burden of providing such information with every application would be disproportionate. The aggregation risk is more appropriately monitored as part of the Public Guardian’s ongoing supervision of deputies. If the Public Guardian, supervising all of the appointments held by a deputy at any given time, finds cause for concern as to adequacy of insurance levels overall, he should refer the matter to the Court which can take such further steps as may be appropriate in the circumstances, including adjusting the security requirement or ultimately terminating the appointment.

79. To facilitate this approach, what is required is that the trust corporation deputy deposits with the OPG upon appointment a copy of its professional indemnity cover (in line with the suggestion by HHJ Marshall QC in Baker v. HJ [2009] COPLR Con Vol 606 at paragraph 106) and undertakes to inform the Public Guardian immediately should its level of cover reduce.

Conclusions :

80. In my judgment, the Court may be satisfied as to sufficiency of insurance cover if an authorised person gives undertakings on behalf of the trust corporation that it will

AND the level of cover is adequate relative to the size of the estate in question. If the Court is concerned that the SRA minimum level may not be sufficient relative to the size of the estate, it should seek further information.

Conclusions and Next Steps

81. The information and undertakings which I have identified as required for the Court to be satisfied that a trust corporation may appropriately be appointed are set out on a single page as Schedule 2 to this judgment.

82. It would be most convenient if these requirements were incorporated into an amended standard COP4 Declaration. Until that can be achieved, in my view the appropriate approach would be for a trust corporation seeking appointment as a property and affairs deputy to file with the application the current standard COP4 form with an additional page attached addressing those matters at schedule 2 of this judgment. The additional page should be endorsed with the name of the case and the name, position and signature of the authorised person giving the undertakings. Section 5 of the COP4 form should be completed so as to make clear that the additional attachment is part of the declaration, to which section 6 will then apply.

83. In respect of each of the applications in these proceedings, the trust corporation applicant is now required to file within 14 days an up to date COP4 declaration with the additional page attached as set out in paragraph 82 above. (For the avoidance of doubt, no COP9 application form is required.) The Court will further consider each application on the papers.

84. If, on considering the updated COP4 with the additional page, the Court is not satisfied that it is appropriate to make the appointment as sought, the particular application will be listed by the Court for further consideration at an oral hearing, reserved to me.

Post Script

85. Whilst the issues raised in these proceedings have been under consideration, there have been other applications before the Court where an applicant trust corporation has been appointed as property and affairs deputy for a limited period (usually twelve-months) or its application has been stayed (“The Other Matters”). In some of The Other Matters, COP9 applications have been made for reconsideration of the time-limited aspect of the appointment or the stay.

86. In the light of this judgment, those trust corporation applicants in The Other Matters are invited to provide to the Court:

a. a schedule of their time-limited appointments and stayed applications (In the schedule, each matter should be identified by name of the protected person and case number, and the date of expiry of any current order should be given); and

b. in respect of each protected person on the schedule an up to date COP4 declaration with the additional information as set out in paragraph 82 above.

87. Upon receipt of the schedule and the declarations, the Court will consider each matter further of its own motion. (No COP9 application is required.) If, on considering the updated COP4 with the additional page, the Court is not satisfied that it is appropriate to vary the order in respect of time limited appointment or to lift the stay, the particular matter will be listed by the Court for further consideration at an oral hearing.

SCHEDULE 1

Schedule 2:

Information/undertakings to be provided by an authorised person on behalf of a trust corporation seeking to be appointed as property and affairs deputy

OR (ii) all the directors of the trust corporation are solicitors and it employs no one (save to the extent that it employs a company secretary); and

(iii) the trust corporation will retain its associated legal practice to carry out all practical work in relation to the management of the incapacitated person’s property and affairs; and

(iv) the trust corporation is covered by the professional indemnity insurance policy of its associated authorised legal practice on the same terms as that practice;