State of play: case summaries

This is a rare case, decided on its own particular facts, where successive appointments of deputies were made.

H was aged 26 at the time of the hearing. As a result of trauma at birth, she was diagnosed with autism. Her cognitive functioning and adaptive skills were said to be 'in the extremely low range' and her speech and communication skills were very limited. H was an only child and lived with both her father and her mother.

H's parents applied to be appointed jointly and severally as her deputies for Property and Financial Affairs and for Health and Personal Welfare. They also applied for the appointment of three successive deputies; H's twin maternal aunts and a carer, all of whom knew H very well.

Senior Judge (SJ) Lush outlined the legislation covering the position, starting with section 16 of the Mental Capacity Act 2005 (MCA) which indicated that a deputyship appointment would be of limited duration, and that a decision by the court was to be preferred to the appointment of a deputy to make a decision.

Section 19 of the MCA permitted successive deputies to be appointed. It was considered that section 16 'trumped' section 19, which includes a principle of the legislation that decisions must be made in the least restrictive way, while section 19 only confers a discretion once the court has decided to appoint a deputy.

As a point of principle was raised, SJ Lush requested the views of counsel for H, the special visitor, the Building Societies Association and the Public Guardian. The background to the MCA was considered, including Law Commission Reports issued in 1995 and consultation papers.

Senior Judge Lush then reviewed H's position in particular, considering the fact that she was unlikely to ever have capacity to decide the matter in question, or to be able to participate. Having considered all the facts, SJ Lush was of the opinion that the appointment of deputies and successors was necessary. This route was preferable to the court making ongoing decisions about H's property and affairs and personal welfare.

SJ Lush set out how this was decided on a balance sheet approach, looking at the disadvantages, such as H's support network possibly changing and the difficulty of wording the appointment, and then also the advantages.

In his view the advantages outweighed the disadvantages. The successive appointment provided continuity of care and decision-making, ongoing contact with persons whom H knew, which given the difficulties in communication, was important.

It was also felt that with the successive deputies being appointed now, they will feel a stronger sense of responsibility and commitment towards H, as well as it saving the procedures and bureaucracy of a further court application.

Other important factors were that the decision would give H's parents peace of mind, and that no harm would be done to H by appointing successive deputies, which was in her best interests.

See In the Matter of H on the Application
of F and M [2015] EWCOP 52

 

XZ and the Public Guardian

This case concerned the effectiveness of a hybrid joint and several appointment under an LPA and the imposition of restrictions. The difference here was the sheer length and complexity of the instructions given and the, perhaps surprising decision, made.

XZ was in his seventies, owned property in several countries and was said to be of high-net-worth. XZ made a Property & Financial Affairs LPA in December 2013, appointing his attorneys to act jointly and severally in relation to all decisions, except those in relation to ‘the sale or purchase of any real estate’ and ‘the sale or purchase of any other asset with a value in excess of $3m’, (Canadian dollars).

In section 5 of the LPA, XZ imposed restrictions and conditions which ran into seven continuation sheets.  He also set out some guidance and allowed the attorneys to charge for their services. 

The restrictions and conditions were set out in the judgment, but contained a precondition that the attorneys could not act unless XZ was believed to lack capacity to make the decision himself at the time, and there had to be a genuine financial need for the action required. 

Once these two conditions were satisfied, one of two further hurdles had to be crossed; the ‘standard threshold’ which included a requirement that more than sixty days must have elapsed since the issue of a psychiatrist’s uncontested opinion.

If the opinion was contested, six months must have elapsed before any action was taken by the attorneys. There were eight different terms regarding the appointment of a psychiatrist to provide an opinion.  The emergency conditions provided that action could be taken quickly if it was necessary to preserve an asset or its value, and the value of the asset did not exceed $25m. 

The Public Guardian (PG) refused to register the LPA on the basis that most of the conditions ‘imposed an unreasonable fetter on the attorneys’ power to act’ and were therefore ineffective as part of an LPA.  XZ’s solicitors explained that the restrictions were to ensure the attorneys did not act unless XZ was incapacitated, and that they did not act hastily. 

XZ asked for the PG’s decision to be reviewed but he declined to do so and the matter proceeded to a hearing.  One of the main issues was the requirement for time to elapse before any action could be taken under the LPA. The 60-day provision prevented any action for effectively two months, which was unlikely to be in the best interests of someone lacking capacity.

Senior Judge Lush reviewed section 23 of the Mental Capacity Act 2005 (MCA) and paragraph 11 of schedule 1 to the act.  In his decision, Senior Judge Lush drew attention to the new LPA forms which came into force on 1 July 2015, which includes the following warning:  ‘Be careful’ that if a LPA does not come into effect straight away, it can make the LPA ‘a lot less useful’.

A donor is free to take this risk it seems. XZ acknowledged that his LPA would be less effective because of the conditions, but he wished them to remain for his own reassurance and peace of mind. 

The view of the PG was considered to be ‘paternalistic’ and that nothing had been argued that meant the LPA infringed any provisions in the MCA or the common law. It was concluded that the PG could not refuse to register the LPA under section 23 of the MCA.  The PG was therefore ordered to register the LPA.

This is a useful case as it regards sophisticated provision in LPAs. It seems that, provided the client fully understands the restrictions, the PG will not necessarily sever them when registering the LPA.  However clients would still need very careful advice on this issue.

See XZ and the Public Guardian [2015] EWCOP 35

 

WA v HA & Others

In this case, the High Court significantly reduced a lump sum paid to a husband on divorce due to his suicide 22 days after the consent order was made, a so-called Barder event.

The wife was a ‘fabulously wealthy’ heiress and during the marriage, the couple and their three young children lived on a large estate worth approximately £30m. This was purchased during the marriage and held partly in the name of the wife and partly in trust.

In 2014 the marriage broke down and the husband took this very badly. Nevertheless financial negotiations proceeded successfully and a settlement was reached. Although the couple had entered a pre-nuptial agreement, this did not feature heavily in the negotiations.

The consent order provided that the wife would pay to the husband £17.34m in two instalments. The first was payable within 14 days of the order and the second within 14 days of his mother vacating the property on the estate she was occupying.

The first payment was made on time and the husband used a portion to purchase a home for his mother. Soon after, the husband committed suicide. He had made a new will leaving his estate to his brothers, with a letter requesting that the money should not be given back to the wife.

The wife appealed on the basis that the order was made to meet the husband’s needs that no longer existed, relying on the case of Barder v Caluori [1988] AC 20.

Moor J found that the initial Barder criteria were met. The husband’s death was a new event. Shortly after the order, the wife applied promptly for permission to appeal and no third parties would be prejudiced. There were therefore three issues to consider. First, was the death foreseeable? Based on the facts, the suicide was not foreseeable; it was, at best, a theoretical possibility.

Second, was the award a sharing award (and hence not susceptible to challenge) or a needs-based award? Moor J found that the award had been needs-based and could therefore be set aside. Virtually all of the assets were non-matrimonial and were not mixed.

The husband had made no claim to a sharing entitlement and, in any case, a sharing award would have been less than a needs-based award, so the latter would have prevailed.

Third, the judge considered what an appropriate award would have been if it had been known that the husband would commit suicide shortly after the conclusion of proceedings. Moor J rejected the wife’s proposal for a nil award.

Given the long marriage with three children, the husband’s contributions as husband and father and the wife’s wealth, he would have had an entitlement based on sharing or need, even knowing he would live only a month more. A one third share of the wife’s net share in the matrimonial home was deemed appropriate.

He had also taken on responsibility to house his mother and it seemed reasonable that he should be able to make bequests. A £5m award was therefore fair in the circumstances.

See WA v Executors of the Estate of HA & Others [2015] EWHC 2233 (Fam)

 

Bagum v Hafiz

For the first time, the Court of Appeal has considered the court’s discretionary power to make orders for sale of trust property under sections 14 of TOLATA (Trusts of Land and Appointment of Trustees Act 1996).

Following the death of her husband, a mother (M) became the sole owner of the family home in Islington, London. She lived at the property with her two sons and their respective families, both of whom made extensive mortgage contributions.

However the increasingly crowded home lead to tensions and one brother (X) moved out. The other (Y) remained. Before leaving, X sought to protect his investment and a declaration of trust was made, by which the house was held for M, X and Y as tenants in common in equal shares.

Sometime later, X wanted to release funds from the property and it was agreed that the property would be sold. An offer was obtained, but at the last minute X refused to sign the transfer document and offered to purchase the house instead.

M (who had never wanted to move) refused her consent, and later instructed solicitors who contacted X and proposed that X sell his interest to Y. Proceedings were eventually issued seeking an order obliging X to sell to Y, or alternatively an order for sale.

The judge at first instance held that she had no authority to make the order primarily sought by M. Nevertheless she ordered that the property be sold and Y be given the opportunity to purchase at a price determined by the court.

In the event that this was not paid within a set time, the property would go to the open market and all three parties could bid. X appealed, submitting that the judge had no jurisdiction to make such an order and even if she had, it was not a proper exercise of her jurisdiction under section 14.

The Court of Appeal dismissed X’s appeal and held that, although unusual, the order made was within the court’s discretion. The first instance judge had rightly concluded that she had no power to order one beneficiary to sell their beneficial interest in the property to another. It was not a function of a trustee of land to directly dispose of beneficial interests under the trust.

However although a sale to particular beneficiaries had much the same economic effect, this did not mean that it was likewise outside the trustees’ functions. Plainly, the trustees’ power of sale includes sale to a beneficiary, as this occurs whenever trustees sell in the open market and a beneficiary is the successful bidder.

The clear purpose of section 14 and section 15 was to give the court much wider discretion than the trustees. For example, the court must consider not only the beneficiaries’ interests, but also, inter alia, the intention of the settlor and the welfare of any minor in occupation.

Of particular relevance here was the purpose of the trust, namely to secure a home for M and Y while protecting the financial interest of X (the trust having been set up when X’s departure was already planned).  The judge’s order adequately balanced these interests.

See Bagum v Hafiz & Anor (Rev 1) [2015] EWCA Civ 801

 

Karen Bayley is a solicitor at Barlow Robbins

Jennifer Ridgway is an associate in the private client team at Michelmores

Jennifer and Karen write regular case updates for Private Client Adviser