Re PP
Summary
In three decisions, published together on Baillii at the end of 2017, District Judge Batten made rulings in relation to LPAs concerning PP.
In the first of the decisions, the judge had to consider the application made by one of two joint and several attorneys for ratification of gifts.
The Applicant, BB, was PP's son-in-law and held a joint and several LPA with a solicitor, CD, for PP's property and affairs. They also held an LPA for health and welfare.
BB's application was made after the Public Guardian had investigated various gifts BB had made out of PP's estate. At the end of the Public Guardian's investigation, he required BB to make an application for retrospective ratification of gifts, failing which the Public Guardian would seek the removal of the attorneys. PP, at the date of the first judgment in 2015, was 78 years old, living in a care home and lacked the capacity to make decisions for herself as to her property and affairs. Her income was above her annual outgoings by just short of £7,000 per annum. She had assets that totalled approximately £1million, after deduction of the challenged gifts.
The main gift that was in issue was a gift of £324,000 to BB's wife, PP's daughter (JB). It was said that this was some form of IHT planning. There were other, less significant gifts that the court considered, totalling just over £10,000. The largest of these was £6,000, again to JB.
The Official Solicitor was appointed PP's litigation friend and opposed the application for ratification. The judgment refers, of course, to s.12 MCA 2005 that sets out the limited powers of attorneys under LPAs to make gifts on behalf of a donee who lacks capacity to make gifts. Broadly, this is the "customary occasions" power, where the value of each gift on such an occasion is not unreasonable, having regard to all the circumstances and, in particular, the size of the donor's estate.
The court also referred to the well-known guidance of Senior Judge Lush in Re Meek [2013] EWCOP 2966.
The judge had little difficulty in coming to the view that the gift of £324,000 was outside BB's powers given by s.12 MCA. The reasoning is set out at paragraphs 109 to 125.
The court in the same passage then went on to consider whether to ratify the gift. Again, with no hesitation, the court refused so to do. There were various reasons: one was the fact that although PP's estate was sufficient, at the moment, to cover her outgoings, that might not persist because she might need nursing care. She was only 78 and her mother was still alive at 100. Furthermore, when she learnt of the gift, she had expressed "shock and surprise". Yet further, when she made a will in 2011, having capacity so to do, she had given half of her residuary estate to JB and the other to her grandchildren. There was no evidence that PP wanted to privilege JB to any greater extent than set out in her will. There had been no history of giving to JB or, indeed, any other family member.
Having come to the decision to refuse to ratify the gift of £324,000, the court had to consider what to do. BB and JB had used £160,000 of the gift to purchase their current home. They were also very much involved in looking after PP from 2011 when she had moved to be near them. The court, therefore, ordered BB to restore £164,000 of the gift and directed a statutory will or codicil so that the remaining £160,000 would be brought into hotchpot.
As regards the smaller gifts, the court did not require repayment of the £6,000 or the other smaller gifts, but directed that equivalent payments should be made to those grandchildren who had not been beneficiaries and that no further gifts would be permitted, save gifts of the annual small gift allowance, currently £250, to be made to all PP's grandchildren in each tax year.
The court then adjourned the question of what to do about the LPAs. This led to the second judgment on the application of the Official Solicitor as litigation friend for PP for the revocation of both LPAs.
In that second judgment, DJ Batten first drew attention to s.22 MCA, that gives only limited powers to the court to revoke a LPA. It is not wholly a "best interests" decision and the court only has jurisdiction (so far as is relevant here) where the donee of the LPA has behaved or is behaving in a way that contravenes his authority or is not in P's best interests, or proposes to behave in a way that would contravene his authority or would not be in P's best interests. Once that jurisdictional hurdle is overcome, then the court has the power (although not the duty) to revoke the LPA, a decision which is taken in P's best interests.
So far as BB was concerned, the court had little difficulty in holding that he had exceeded his authority. So far as CD was concerned, the judge concluded that she had not contravened her authority, but had not acted in PP's best interests because she had not taken decisive action when she learnt of the gift to JP of £324,000 and had failed to provide in her role as professional attorney sufficient oversight of BB and ensure that he was acting in PP's best interests.
The judge then went on to consider whether or not, the jurisdictional hurdle having been overcome, it was in PP's best interests that BB and CD should remain as attorneys of the property and affairs LPA. Again, with no hesitation, the court held that it was not and ordered the appointment of a deputy for property and affairs from the Public Guardian's panel of deputies.
So far as the health and welfare LPA was concerned, a different decision was reached. There was recognition of the fact that it had been PP's choice to appoint BB and CD as her health and welfare attorneys and did not find that they had acted in contravention of their authority or not in PP's best interests. In those circumstances, the court did not revoke the LPA for health and welfare.
The court then turned to the costs of the ratification application. The court held that BB's conduct took the case outside the general rule in relation to costs of property and affairs applications set out in the then Rule 156, namely that such costs are charged on the estate and applied Rule 159, which allowed the court to depart from that general rule, having regard to all the circumstances, especially including conduct. The court found that BB's conduct justified an order that BB pay his own costs and the costs of the Official Solicitor, apart from £4,000 plus VAT which should come from PP's estate in recognition that a prospective application for approval of gifts may have been appropriate.
So far as the costs of the revocation application were concerned, those were adjourned for written submissions and the final judgment of the three gives the decision in relation thereto. In relation to the application for revocation of the property and affairs LPA, the court applied Rules 156 and 159, and decided that the conduct of both BB and CD had justified a departure from the general rule. In the result, they were ordered to pay their own costs and the costs of the Official Solicitor as litigation friend of PP.
Finally, in relation to the application for the revocation of the LPA for health and welfare, the court applied the ruling of Senior Judge Lush that such an application falls to be decided under Rule 156. As the LPA for health and welfare had not been revoked, the court ordered that the costs of that application should come out of PP's estate and allowed 10% of BB's and CD's costs to come out of PP's estate.
Comment
These decisions are useful illustrations of the problems that can arise where attorneys do not understand the limits of their authority in relation to gifts (as to which see also the OPG's updated guidance note, discussed further below). The case is somewhat surprising in that one of the attorneys was a solicitor and it seems that she had failed to acquaint the non-professional attorney with his responsibilities. There had also, it seems, been a failure of oversight.
The refusal to ratify the large gift and the revocation of the property and affairs LPA would appear, on the face of it, to have been almost inevitable and underline the fact that the court is often reluctant, even on a prospective application, to approve gifts of substantial parts of P's estate simply for the purpose of IHT planning, especially where that might leave P vulnerable to running out of money for nursing and care costs.
The order made on the gift application is interesting in that it shows flexibility in the court's response to its refusal to ratify the gift, allowing the donee to keep part of the gift, but bringing it into hotchpot instead. Whilst this course of action was plainly eminently sensible, it does – for the more technically-minded – raise a question as to the precise jurisdictional basis upon which the court could make it. The Court of Protection was not, here, making decisions on behalf of P, but purporting to direct what others should do with P's property. On one view, the court should have authorised PP's litigation friend to begin restitution proceedings in the Chancery Division. However, this would have an absurdly complex and expensive exercise, and it is hardly surprising that the court wished to take pragmatic steps to resolve the situation. We have no doubt that, had the question been asked (as it appears not to have been) thought would have been given as to precisely how it could have been done: perhaps the answer is that it was exercising its imported High Court powers under s.45(1) MCA 2005 "in connection with its jurisdiction" in effect to grant injunctive relief against the defaulters.
