Mental Capacity Case

Day & Others v Royal College of Music & Harris

Rix, Lloyd and McFarlane LJJ

Summary: The Court of Appeal considered two appeals arising from disputes relating to the estate of the late Sir Malcolm Arnold. The disputes were, in reality, between Sir Malcolm Arnold's two children and Mr Day who was Sir Malcolm Arnold's carer for the last 22 years of his life. Mr Day had been granted an enduring power of attorney in respect of Sir Malcolm Arnold in 1990. That EPA was registered with the Court in February 2002. The Royal College of Music took no active part in the proceedings. Although Mr Harris was a party to the proceedings and attended the hearings, he also took no active part.

While Sir Malcolm was still alive, a number of payments (totalling £36,000) expressed to be gifts were made to Mr Day from a joint bank account in the names of Mr Day and Sir Malcolm Arnold but in which Sir Malcolm Arnold held the beneficial interest. Mr Day was a signatory on the account and in accordance with a bank mandate was able to draw cheques. He had signed the cheques at issue. The payments were made in light of tax advice and had the effect of reducing Sir Malcolm Arnold's tax liability. The Judge below found that the monies had been given to Mr Day by Sir Arnold with his free and fully informed consent.

Sir Malcolm's two children sought an order that Mr Day should account to the Estate for those monies. They contended that (i) Mr Day was unable to make the gifts to himself as he held the EPA and (ii) in the alternative, the making of those gifts amounted to a breach of his fiduciary duties (owed as a result of the EPA). In relation to this second point, a further issue arose as to the relevance and nature of any consent Sir Malcolm Arnold may have given.

Section 3 of the Enduring Powers of Attorney Act 1985 ("the Act") confers a general authority on the attorney on the donor's behalf. However, it was common ground that the payments at issue could not be brought within the scope of section 3 and as such could not be justified under the EPA itself.

Mr Day contended that when signing the gifts he had been acting under the bank mandate and not in his capacity under the EPA.

The legal question was whether, as a matter of statutory construction, Mr Day could in effect take himself outside of the terms of the Act as he contended in reliance on the consent that had, as a matter of fact, been found to have been given.

The key provision is section 7 of the Act which provides:

"7 (1) The effect of the registration of an instrument under section 6 is that—

(a) no revocation of the power by the donor shall be valid unless and until the court confirms the revocation under section 8(3);

(b) no disclaimer of the power shall be valid unless and until the attorney gives notice of it to the court;

(c) the donor may not extend or restrict the scope of the authority conferred by the instrument and no instruction or consent given by him after registration shall, in the case of a consent, confer any right and, in the case of an instruction, impose or confer any obligation or right on or create any liability of the attorney or other persons having notice of the instruction or consent.

(2) Subsection (1) above applies for so long as the instrument is registered under section 6 whether or not the donor is for the time being mentally incapable."

Counsel for the children contended that the effect of section 7(1)(c) is that, once an EPA is registered, a principal, even if of sufficient mental capacity for the purpose, cannot validly give consent to the attorney to authorise something to be done which is not authorised under the EPA itself. That consent or authority can only come from the Court. Accordingly, the Act should be interpreted as excluding all possibility of the person who is the attorney under a registered EPA doing something which section 3(5) of the EPA prohibits, even if there is some other mechanism whereby, in other circumstances, he could do it, subject to having the consent of the donor of the EPA.

On this analysis, Mr Day did not have the power to sign the cheques once the EPA had been registered notwithstanding the mandate of the bank.

Lloyd LJ did not accept the Children's submissions. The Judge held that the effect of section 7 (1) (c) is to preserve the effect of the EPA once registered, so as to be immune from anything done by the donor which might otherwise either enlarge it or constrain it, or limit the scope of the acts which the attorney can lawfully or properly do under it. However, the argument that all aspects of Mr Day's ability to act on behalf of Sir Malcolm were embraced within the scope of the EPA, once it had been created, and were therefore all affected by section 7 of the Act once it was registered, failed. It remained open to Mr Day to draw cheques on the account after the registration (with the free and informed consent of Sir Malcolm Arnold) in the same manner as he had prior to the registration. If an individual has the consent of the donor and has two different capacities in which he can act on behalf of the donor, one of them permitting, and the other not permitting, him to do that which the donor has authorised or agreed to, there is no reason why he should not be regarded as using the power under which the operation can be valid and effective, rather than that under which it could not be done. The critical point is the donor's consent.

Lloyd LJ further declined to overturn the finding of the Judge below in relation to the issue of consent, noting that where the evidence as to consent is in general terms, the Judge's understanding of the evidence will be particularly significant.

The analysis on the point of statutory construction was supported by McFarlane LJ who agreed that the Act is intended to establish a category of agency which will endure and will not be revoked by the subsequent mental incapacity of the principal. Accordingly, "It is …to be seen as a facility rather than a strait-jacket, permitting the agent to continue to act under the terms of the authority contained in the EPA, but not, of itself, preventing the individual who is the agent from continuing to act in another capacity or under a different authority in relation to the same principal as the factual circumstances may justify." McFarlane LJ further held that section 7(2) of the Act contemplates that even after the date of registration of an EPA the mental capacity of the donor may fluctuate and that the purpose of section 7 as a whole is to establish the scope of the authority granted under the EPA with clarity from the date of registration onwards 'whether or not the donor is for the time being mentally incapable'. Macfarlane LJ concluded that "the circumstances found by the judge in the present case to the effect that, in relation to making the five disputed gifts, Sir Malcolm had the necessary mental capacity to authorise payment out of the bank account is therefore a state of affairs, in terms of capacity, which is expressly tolerated by section 7(2)."

Rix LJ dissented on this point. He considered that the premise of registration of an EPA is that the donor is suffering actual or incipient mental incapacity. The watershed of registration remains as long as registration survives, even if the donor's mental capacity should change for the better. Rix LJ considered that it is implicit in the whole structure of the Act that the donor could not seek to create another agency in the future or to give a new power of attorney, whether in the form contemplated by the Act, or in any other form. That must follow for the past as well such that a previous authority granted could not be maintained into this new regulated world as though there had not been a Court supervised registration. Accordingly, once registration had occurred, Mr Day could not take himself outside the scope of the EPA and rely on a bank mandate. To draw the cheques from the account both the general consent and the specific consent of Sir Malcolm Arnold would have been required.

Comment: This decision is of particular interest as, in effect, the majority declined to find that an individual could be de facto deprived of their power to consent in all contexts by reason of a statutory mechanism (in this case the registration of an EPA). In rejecting the analysis of registration on an EPA amounting to a "watershed", the majority preferred a construction which allowed the Court to focus on the donor's on-going capability to consent to acts relevant to the management of their affairs. This finding was made in a context in which the Court explicitly recognised that the Act contemplated the possibility of fluctuating consent. This decision is therefore an endorsement of the primary importance to be attached to personal autonomy and a reminder that, where an individual's capacity (to consent or otherwise) may fluctuate, the Court should be slow to favour a conclusion or construction which would be inconsistent with that capacity ever being capable of being regained.