Mental Capacity Case

Irwin Mitchell Trust Corporation v PW & The Public Guardian

HHJ Hilder


The Court of Protection has given a clear statement that there is an actual conflict of interest when a Trust Corporation acting as property and affairs deputy appoints an Asset Management company with the same corporate owner. To avoid breaching rules against conflicts of interest, a deputy must seek ratification for any such conflict of interest from the Court of Protection. 

This application was brought by Irwin Mitchell Trust Corporation (IMTC), a wholly owned subsidiary of Irwin Mitchell LLP, which acted as property and affairs deputy for PW. PW had significant assets following a personal injury award which had been paid partly as a lump sum and partly by ongoing annual periodical payments. IMTC had acted as PW’s property and affairs deputy since 2017, and had appointed Irwin Mitchell Asset Management (IMAM) ‘as investment manager for a significant part of PW's damages award’ [19] in the same year.  In 2020, following a successful statutory will application, IMTC was directed by the Court of Protection ‘to make an application "to seek retrospective authority" to instruct IMAM.’ [10] The matter was delayed due to issues of funding representation for PW in proceedings. 

14. The unchallenged evidence of IMTC…is that £600,000 of PW's funds was initially invested with IMAM. There have been two subsequent withdrawals. The total return during the period of investment is £49,255, equivalent to approximately 3% per annum. The total charges for the calendar year 2019 were 1.89%, including 0.59% in IMAM's advice fees and 0.08% in IMAM transaction costs. 

Senior Judge Hilder rehearsed the propositions of fiduciary duties, noting: 

  • A person with a fiduciary duty should not ordinarily put himself in a position “where his interests and duty conflict”; Bray v Ford [1896] AC 44 at paragraph 51, but this may be departed from ‘in many cases’;
  • “The consequence of this rule, and the underlying rationale for it, is that transactions entered into where the fiduciary's duty conflicts with their interests are capable of being set aside as of right by their principal. This is 'the self-dealing rule’” (paragraph 20); 
  • “Where the principal lacks capacity to make decisions about their property and affairs, only the Court of Protection may grant…ratification” (paragraph 21) of a conflict of interest. 

The MCA 2005 provides at s.19(6) that “A deputy is to be treated as P’s agent in relation to anything done or decided by him within the scope of his appointment and in accordance with this Part.”

Senior Judge Hilder considered that “the primary question which I am now asked to determine is whether the conflict of interest rule applies to the appointment by IMTC as deputy of IMAM as asset manager for PW's funds: ie would a reasonable man looking at the relevant facts and circumstances of this particular case think there was a real sensible possibility of conflict?” (paragraph 26).

The central argument of IMTC was that while there is "a theoretical potential"..for a conflict of interest…there is no "real sensible possibility" of conflict because it has adopted procedures which eliminate that potential” (paragraph 32). Looking to case law from New Zealand and Hong Kong, IMTC argued that where a management company was a well-recognised specialist and other options had been considered, there was not necessarily any actual conflict of interest if a trustee selected the firm to which it had links after considering the market more generally. 

Senior Judge Hilder was not persuaded by the non-binding case law and observed that ‘’'human nature being what it is,' neither pre-eminence nor success of the linked business is any guarantor of unconflicted motivation in the fiduciary. Indeed they may just encourage complacency, so that the fiduciary fails to consider the alternatives properly. The rule is founded in practical expediency and applies even though it may be breached without disadvantage to the beneficiary” (paragraph 33(a)). 

IMTC made the following submissions as to why its processes prevented a ‘real sensible possibility of conflict’:

  • It is a highly experienced deputy and is accustomed to taking decisions regarding the appointment of investment advisers.
  • It is not alone in using a linked financial adviser or investment manager.
  • IMTC “maintains a ‘panel’ of investment advisers for consideration on behalf of any person for whom it acts as deputy. Inclusion on that panel is a matter kept under review by an ‘investment executive committee’ of IMT…All the companies on the panel have specialist teams that deal either exclusively or largely with Court of Protection clients and it is a strict requirement that they do not have any entry charge fees nor any exit fees applicable to the portfolio” (paragraph 39(a)); 
  • IMTC undertakes a ‘beauty parade’ for deputyship firms, and a family member of the protected person will be invited to participate. Each firm selected for the ‘beauty parade’ is given the same instructions and invited to prepared a proposal, and the assessment of the bids are by set criteria; 
  • IMAM will be excluded from the ‘beauty parade’ if the family member objects, but the shortlist will typically include IMAM if there has been no objection. 
  • The family member participating in the ‘beauty parade’ will be informed of how IMAM and IMTC are related.
  • If a family member is involved, the ‘beauty parade’ will be an attended event.
  • A best interests decision is taken which takes into account the views of P’s family members and other relevant matters. 
  • The performance of the portfolio and investment are kept under continuous review. 

This process was followed in PW’s case, and her husband attended a ‘beauty parade,’ following which IMAM was chosen.   

Expert evidence filed in the case and evidence filed by deputies did not support the position taken by IMTC, and expressed views that appointing an internal investment manager would create a conflict of interest.

IMTC’s position was opposed by both the Official Solicitor and the Public Guardian, and both considered that there was a clear conflict of interest. They expressed concern that IMAM would have specialist knowledge which would advantage it in the ‘beauty parade’, and felt that IMTC had wrongly attempted “to treat members of the family as if they were the person for whom it is appointed, capable of consenting to the conflict of interest” (paragraph 59). The Official Solicitor argued that:

The actual conflict of interest would only be "wholly extinguished" in the following circumstances…:

a.    where IMTC was not responsible for the appointment, for example because it was made before IMTC had been appointed as deputy (and even so, the subsequent reviews would be problematic, giving rise to concern as to whether a subsequent appointment of IMTC would be in P's best interests);
b.    the appointment process was conducted in a wholly independent way unconnected to IMTC (the independent expert identifies the possibility of using an external adviser but again the reviews would be problematic);

c.    the Court approved the appointment. (paragraph 40)

Senior Judge Hilder accepted the position of the Official Solicitor and Public Guardian. She considered that taking to account the views of family members was relevant to the decision but “an insubstantial safeguard against conflict” (paragraph 42(a)).  The family member is already in a position of trust with IMTC, and in PW’s case, PW’s husband had instructed Irwin Mitchell LLP to act in the personal injury proceedings. “The IMAM proposal is then presented with familiar graphic style and express reference to its close relationship to the Irwin Mitchell law firm. Such inclusion of a family member is hardly robust oversight” (paragraph 42(a)). The court also noted that “the frequency with which IMAM is invited to take part in the 'beauty parade' seems very likely to give IMAM an advantage in knowing how to pitch its presentation” (paragraph 42(b)). Finally, the ‘objective’ scoring system was “manifestly subject to subjective interpretation and then human error as well, to a degree capable of changing who actually comes out with the highest score” (paragraph 42(c)). 

Senior Judge Hilder found that the appointment of IMAM had been a conflict of interest. IMTC did not deny that the appointment of IMAM made IMTC better off, and “[t]he processes which IMTC has adopted when considering the appointment of IMAM do not target the substance of the self-dealing rule: that is, they do not remove the financial gain to IMTC. Such processes could have been adopted, for example by agreeing to waive any fee to IMAM where the instruction comes from IMTC as deputy. Then there would be no financial advantage to IMTC in the instruction of IMAM, no interest to be in conflict with the interests of the person for whom IMTC acts. Of course, I recognise that the Irwin Mitchell group would be likely to reject this approach as lacking commercial sense but that merely reinforces the existence of IMTC's interest in the appointment of IMAM” (paragraph 63). She did not consider that the participation of a family member protected against the risk, and the family member could not give consent to a conflict of interest on behalf of the protected person where IMTC was property and affairs deputy: only the Court of Protection could do so. 

The judgment concluded that “[t[aking into account all the evidence in respect of IMTC processes, in my judgment there remained a very clear, not remotely fanciful, actual conflict of interest in IMTC appointing IMAM to manage PW's funds. IMTC's processes were not capable of extinguishing, and did not extinguish, that conflict” (paragraph 67).  

Senior Judge Hilder went on to consider whether the appointment had been ratified, and concluded that it had not. Senior Judge Hilder considered that the judgment of Senior Judge Lush in Re MWS was “unequivocal (at paragraph 23) that there is a conflict of interest in appointment of IMAM by IMTC as deputy” (paragraph 77) and did not act as ratification or provide general authority for an appointment of this nature. Senior Judge Hilder similarly found that email communications following the judgment did not provide any such authorisation, and was clearly somewhat uncomfortable about the communications, noting that “such informal communications, without input or even awareness of the other parties to proceedings, are not capable of establishing any binding authority. That they took place at all is probably best put down to a lingering cultural hangover from a time when the Court of Protection was an Office of the Supreme Court, as opposed to the independent court of record which it is now” (paragraph 79).   In any event, she found, they did not amount to such authorisation.

Senior Judge Hilder declined to consider whether the appointment ought to be ratified pending receipt of further evidence and submissions. Senior Judge Hilder accepted that “management of damages awards is a specialist expertise, significantly different to the management of earned or inherited wealth, with a relatively small pool of firms offering such expertise and experience. However, there is a limit to the impact of these accepted points: fiduciary duties are well settled, as demonstrated by the age of the authorities cited above as fundamental propositions, and the pool of specialist firms is not so small that IMTC cannot maintain a standing panel more than twice the size of the numbers considered appropriate to engage in a beauty parade” (paragraph 76). 

Her conclusion was pithy: 

93. In my judgment the appointment by IMTC of IMAM to manage the assets of PW clearly conflicts with the rule against self-dealing. There is actual conflict of interest in that the Irwin Mitchell group gains financially. There is nothing in Re MWS or subsequent e-mail communications which can reasonably be understood as approval of appointment of IMAM if it follows a beauty parade in which a family member of a protected person participates. The processes adopted by IMTC do not and could not extinguish that conflict. In my view, that these proceedings have been necessary at all is a paradigm example of Lord Herschell’s wise recognition of the tendency of human nature to be swayed by interest rather than duty. 


The conclusions in this case could not be clearer or more robust in finding that a conflict of interest existed. Beyond the implications for asset management, this judgment appears likely to cause significant consideration on the use of ‘in-house’ services by property and affairs deputies, and likely many applications for ex post facto ratifications of conflicts of interest. It also throws into sharper light other situations where conflicts might arise – an obvious one being where the firm instructed on a personal injury claim also puts itself forward to act as deputy for the management of any monies received. That, in fact, had happened in the instant case, but the judicial Eye of Sauron did not descend upon that aspect. It may not be very long before it does.