Re Various Lasting Powers of Attorney

Summary

In this case the Public Guardian brought to the court various LPAs that had been submitted for registration but in respect of which there were concerns as to the effectiveness and lawfulness of some of the provisions.

In essence, the concerns related to provisions in the LPAs that either mandated or stated a desire that the donee should benefit people other than the donor including in one case the donee himself. The question was, could such provisions be included in a valid LPA or should they be severed?

Mostly, the provisions had been inserted in the "instructions" section on the form but some had been in the "preferences" section.

This is one example.

At section 7 of the instrument under the heading 'Preferences' the donor entered the words "The needs of [LS] before anyone else.' Under the heading 'Instructions', she entered the words "The attorney [SS] must ensure that the needs of my daughter [LS] are taken care of…"

At paragraph 69, the court expressed general conclusions. They can be summarised as follows.

1. A donor cannot authorise a gift within the meaning of s.12 MCA 2005 so as to extend the attorney's powers to make gifts in circumstances covered by that section.
2. Provisions that authorise the benefitting of another are not rendered valid simply by reason of the fact that the donor owes a legal obligation towards that other for that other's maintenance.
3. A provision that provides for the donee to use the donor's funds to benefit another person may be valid so long as it is a precatory provision. If it is mandatory, it is ineffective.
4. A provision that authorises the benefitting of the donee is not invalid simply because the donee is in a fiduciary position viz a viz the donor.
5. Such a provision is also not invalid simply because of a conflict of interests as such has been authorised by the donor and in any event the donee is obliged to act in the donor's best interests.

On the way to these conclusions, there was substantial discussion of what constituted a gift within the meaning of section 12. Section 12 provides.

12 Scope of lasting powers of attorney: gifts

(1)    Where a lasting power of attorney confers authority to make decisions about P's property and affairs, it does not authorise a donee (or, if more than one, any of them) to dispose of the donor's property by making gifts except to the extent permitted by subsection (2).

(2)    The donee may make gifts –

1.       on customary occasion to persons (including himself) who are related to or connected with the donor, or
2.       to any charity to whom the donor made or might have been expected to make gifts,

if the value of each such gift is not unreasonable having regard to all the circumstances and, in particular, the size of the donor's estate.

(3)    'Customary occasion' means –

1.       the occasion or anniversary of a birth, a marriage or the formation of a civil partnership, or
2.       any other occasion on which presents are customarily given within families or among friends or associates.

(4)    Subsection (2) is subject to any conditions or restrictions in the instrument.

The court held that the only voluntary dispositions of the donor's estate that come within this section are those made on a "customary occasion" or where the donor is not under a degree of obligation in respect of the disposition (see paragraph 54). This departs from the previously held view, including by former Senior Judge Lush, that there had to be some element of need in the disponee that is satisfied by the disposition.

As regards the actual provisions, the court reminded itself that the fact that the term was in the "instructions" or "preferences" section was not determinative. The court then went on to construe each provision. Most were held mandatory and therefore invalid because they would inhibit the attorney from making decisions in the donor's best interests so, in the example given above the decision was:

At section 7 of the instrument under the heading 'Preferences' the donor entered the words "The needs of [LS] before anyone else.' Under the heading 'Instructions', she entered the words "The attorney [SS] must ensure that the needs of my daughter [LS] are taken care of…

The first of these provisions is an expression of wishes. It does not contravene the Act. It is not ineffective as part of the lasting power of attorney, and it would not prevent the instrument from operating as a valid lasting power of attorney. Its inclusion in the instrument is not a problem.

The second of these provisions is in mandatory terms. As a condition of authority, it would prevent the attorney from properly making a best interests decision. It is therefore ineffective as part of a lasting power of attorney. If severed, the instrument can operate as a valid lasting power of attorney.

I sever the second provision and direct the Public Guardian to register the instrument with a note to that effect attached.

At paragraph 68, the court gave guidance as to the circumstances where an attorney should seek the court's consent to a proposed disposition:

A proportionate approach has to be taken to considerations of conflict of interest, balancing the risk of abuse against the objective of facilitating autonomous decision making. In my judgment, where the donor whilst he had capacity used his own funds to benefit another (including the attorney) in the way contemplated, or where there is an express statement in the instrument of the donor's wish that his funds be used in the way contemplated, there should be no requirement for the attorney to seek prior authority from the court to use the donor's funds to benefit another, even if the attorney is in a position of conflict of interest. However, in the absence of either capacitous demonstration of such beliefs and values, or express statement of wishes in the instrument, where the use of funds under contemplation gives rise to a conflict of interest on the part of the attorney, the attorney should make an application to the court for prior authority pursuant to section 23(2) of the Act.

Comment

The guidance given in the paragraph immediately above only applies to dispositions that are not gifts covered by s.12 MCA 2005 (as explained above). In respect of such gifts, if they are not authorised by section 12, then the attorney must seek permission from the court.

This decision extends somewhat the class of voluntary dispositions that are not gifts within s. 12 MCA 2005 beyond those dispositions that cater for a person's needs to those where there is some sense of obligation on the part of the donor of the LPA towards the person being benefitted (provided that the disposition is not on a "customary occasion").

The decision also makes it clear that where a disposition is mandated by the LPA, the provision will be ineffective and severed whereas, in general, precatory words will be allowed.

Unusually, but helpfully, Senior Judge Hilder, noting that her conclusions will be "applied in the day to day context of lay people making arrangements for management of their funds and acting as attorney," summarised them in the form of a 'decision tree' attached to this judgment.