Judge: HHJ Purle QC
Citation:  EWCOP 24
In this rather odd case, HHJ Purle QC had to consider whether he should order part of a bond held by E (the mother and deputy of M, the subject of the proceedings) to be called in in circumstances where it was said that she had failed to act in accordance with her deputyship duties by failing to pay a means tested contribution which the local authority assessed as due from M in respect of accommodation costs. Judicial review proceedings had previously been brought in M’s name by his father in respect of the local authority’s failure to fund M’s education at a suitable establishment outside the local authority’s area. The judicial review proceedings were ultimately compromised in an agreement between the relevant parties, including the local authority and the Learning and Skills Council, which provided (inter alia) for the LSC paying for M’s educational provisions and the local authority paying both for the accommodation aspect, ancillary to the educational provision, and travel costs.
The local authority, following the agreed compromise, met the accommodation and transport costs, but sought to recoup some of the accommodation costs (but not any part of the transport costs) following means testing of M, whose means appear to consisted entirely of state benefits. E as M’s Deputy refused to pay any part of the means tested costs. It is this refusal which was said by the local authority to amount to a failure to carry out her deputyship duties, and (inferentially) to have caused M’s estate loss. The local authority therefore brought an application in on-running welfare proceedings involving M and her parents for part of the deputyship bond to be called in to enable it to recoup the costs it had incurred.
HHJ Purle QC rejected the application, construing the compromise agreement in the judicial review proceedings as both one which provided for unconditional funding on the part of the local authority, and one that was within the powers of the local authority to enter into. There was therefore no basis for the claim that the local authority sought to advance, and the application to call in the bond was rejected. In addition:
- 26. […] I am bound to say that I am puzzled as to the propriety of the procedure that has been adopted in calling in the bond in a summary way by an application made within the Court of Protection proceedings by the local authority. As Ms Bretherton QC demonstrated in relation to another claim, to which I shall come, the powers of the Court of Protection are limited. Leaving aside powers to grant focussed, declaratory best interest orders, none of which is relevant to the present case, the power is to take decisions for a person (“P”) which P by virtue of incapacity is unable to take.
- The calling in of the bond requires the prior determination of whether or not E as Deputy is liable for loss caused to M by virtue of her failure properly to carry out her duties. The guarantor is only liable if E is liable. Thus it must first be established (a) that E failed properly to carry out her duties; (b) that this failure occasioned loss to M’s estate.
- There was at one stage, to my mind, an ambiguity in the way in which the local authority were approaching the matter, as it appeared to focus at least in part upon the impropriety of other expenditure incurred by E, and not the failure to pay the sums due to the local authority. However, Ms Bretherton QC confirmed in her submissions that this was not the legal basis of the claim to call in the bond. The sole complaint was that E, whilst Deputy, had not in fact paid – which she did not – any of the means tested contributions that the local authority required from M. That, however, did not give the local authority any cause of action against E, nor did it cause M’s estate any loss. E, as Deputy, was answerable to M (not the local authority), the Public Guardian and the Court of Protection (acting in M’s interests) in respect of any mismanagement of M’s assets, but not to the local authority.
- In my judgment where there is a disputed case of mismanagement, it is not appropriate for that dispute to be adjudicated upon in a relatively informal application, made to the Court of Protection, for the calling in of the bond. Once of course liability is admitted or established, the calling in of the bond is a routine matter. But first the liability of the person who is ultimately liable to the guarantor once the bond is called in must be established, and that can ordinarily only be established in proceedings brought by, or on behalf of, P – in this case M – against the officeholder in question, which in this case was E. M, of course, is not in a position to bring proceedings because he lacks capacity to do so. The local authority are not his representative. J is and J has not sought to make any complaint against E in this connection, nor do I see how she could do so. The Public Guardian might initiate the calling in of the bond but still the underlying liability of the Deputy must first be established because until such liability is established the guarantor is not liable under the bond. In a case therefore where the liability of the Deputy (and therefore of the guarantor) is disputed, that liability must first be established by proceedings brought by someone with standing to do so.
- As far as the local authority is concerned they are a third party creditor of M, assuming for present purposes (contrary to what I have already held) that they are entitled to a means tested contribution from M. They have no cause of action against E, any more than any other creditor would be entitled to bring proceedings to enforce obligations owed not to the creditor but to that creditor’s debtor. A creditor dealing with someone of full capacity may enforce payment of a debt, which may result in bankruptcy resulting in the appointment of a trustee in bankruptcy, who can then enforce the obligations owed to the bankrupt. But what is not legitimate is to short circuit all that by enabling creditors to bring proceedings in their own name for obligations owed not to them but to someone else, even when that someone else owes the creditor money. That is simply not the way in which the law of obligations works.
- Accordingly it seems to me that the local authority’s application was misconceived because (a) there must first be established a liability under the Bond, which is dependent on E being liable for loss occasioned by her breaches of duty; (b) no proceedings have been brought to establish that liability; (c) only M, or his Deputy on his behalf with the approval of the Court of Protection, or possibly the Public Guardian, could bring such proceedings.
- In addition, the mere failure to make the means tested payments did not cause M any loss falling within the bond. Even if the means tested amounts were due, his estate was not diminished by the failure to pay them, so that there was no recoverable loss. As mentioned earlier, there was some ambiguity in the case as originally advanced because it appeared to be suggested that there was improper expenditure in other respects. The extent and precise amount of the supposed improper expenditure was not examined in detail, however, and, as recorded earlier, Ms Bretherton QC confirmed that the sole legal basis of the claim for calling in the bond was not by reference to what E spent on other things, but on her failure to make the means tested payments to the local authority. On that basis, M’s estate has suffered no loss.
It is clear that HHJ Purle QC was then asked to provide further reasoning in this regard, and did so:
- [Counsel for the local authority] said rightly that the local authority is not seeking to recover the monies for itself but is merely seeking the calling in of the bond, which is properly a Court of Protection matter, and will result in the monies being paid into M’s estate. I agree that once liability is established, or admitted under the bond, the calling in of the bond is a matter which the Court of Protection, or the Public Guardian, can effect. This is not however a case where liability is admitted, so it has to be established by appropriate action. I have sought to explain why, given that prior requirement, liability can only be established at the suit of M or those representing him (not the local authority) as M’s estate has on this hypothesis suffered a loss, not the local authority. Further, it seems to me vital, in a case of disputed liability, that there should be a determination of that dispute with pleadings and the procedural safeguards that proper case management provides. Further, for the Court of Protection to determine such a dispute (which is a necessary pre-requisite of the calling in of the bond) would be beyond its narrow function and power of making best interest decisions for M. The Court of Protection can decide that proceedings to enforce the disputed liability be taken for the benefit of M, as he is in no position to take that decision himself. What it should not in my judgment do is try that dispute.
HHJ Purle QC also rejected claims by M’s parents that they had been caused loss by the acts of the local authority on the basis that the local authority (once it had taken over as deputy) had withheld monies due to M, leading his parents to spend monies of their own in looking after M and in providing for his necessities. The judge made clear not only was this not a matter that could be considered by the Court of Protection, but also that – substantively – it was one for economic loss, “which presupposes that the local authority owes a duty to E and A directly. This is one of the most difficult areas of the law to make good and I have heard nothing which has persuaded me that E and A might even arguably get over that hurdle.”
This application was – to put it mildly – a surprising one for the local authority to make, both substantively and procedurally. It is perhaps unfortunate that HHJ Purle QC did not have drawn to his attention the decision of HHJ Hodge QC in Re Meek  EWCOP1, in which HHJ Hodge QC had had cause to consider in some detail when the court will call in a bond. The two judgments are not inconsistent, but the earlier judgment provides useful context for the operation of the bond scheme. As HHJ Hodge QC had noted (at para 38):
Effectively, the bond scheme offers an alternative to a deputy bringing an action against a previous defaulting deputy to recover lost or stolen funds. It provides an immediate, and straightforward, mechanism by which the court can ensure that an incapacitous person is compensated for losses that have been incurred through the default of his deputy. It avoids the delay and expense which the incapacitous person would otherwise face in bringing proceedings against a defaulting deputy, who may be of questionable solvency, and enforcing any judgment obtained within those proceedings. The defaulting deputy does not get off scot-free, but he is instead likely to face proceedings brought by the bond provider.
In the earlier case HHJ Hodge QC had held both that the decision whether to call one is is one to be taken for or on behalf of P (therefore on a “best interests” basis) and that (at para 93) that “the appropriate course the Court of Protection should take in cases of default by a deputy is to call in the security bond almost as a matter of course.”
In Re Meek, the default was clear. In the instant case, the default was not clear, and it is therefore hardly surprising that the court was troubled at the idea of using the summary procedure for calling in a bond.