Feature

posted 1 Nov 1997 in Volume 3 Issue 1

Court of Protection Case Report

Denzil Lush, Master of the Court of Protection, summarises a decision of Mr Justice Rattee on switching jurisdictions between the Enduring Powers of Attorney Act and the Mental Health Act

The Law Commission, in Consultation Paper No. 128 (HMSO 1993) page 65, said: "Some commentators have suggested that the barriers between receivership and enduring powers of attorney may have been too tightly drawn and more flexibility should be introduced. Therefore while we acknowledge the conceptual difference between the two schemes we think there is some force in the argument that there are benefits in switching jurisdictions. "

The following case involves switching between the Enduring Powers of Attorney Act 1985 and the Mental Health Act 2983. It was referred to the nominated judge by my predecessor, Mrs A. B. Macfarlane, two days before she retired. The matter was heard by Mr Justice Rattee on 23 January 1996. His judgement, which has not yet been fully reported, and which I have lightly edited here, was as follows.

RE C (9103771T)

"This is an application to the Court of Protection for authority to carry out a transaction in relation to the estate of a patient, that is to say a person incapable of managing his own affairs by reason of mental disorder. In the usual way I conducted the hearing of the matter in Chambers, but I have been asked and agreed to give judgement in open court, because the application raises one or two points of general application in matters coming within the purview of the Court of Protection. Accordingly I give this judgement in open court, but on condition, of course, that no report of the judgement shall in any way identify any of the parties concerned.

On 7th March 1991 the patient executed a general power of attorney in favour of his wife. The power qualified as an enduring power of attorney under the Enduring Powers of Attorney Act 1985. However, the power concerned contained a limitation to the effect that the patient's wife, as attorney, was not at liberty under the power to effect transactions involving assets worth more than &50,000. The patient's estate is in fact worth several millions of pounds.

The power of attorney was registered on 20th January 1992. The effect of registration is set out in section 7 of the 1985 Act, which, by subsection (I), provides as follows:

"The effect of the registration of an instrument under section 6 is that ...

(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 the 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. "

Subsection (2) of section 7 provides:

"Subsection(l) 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."

The patient owns the long lease of a house in London. His wife has been advised that the patient has the right to acquire the freehold of that house under the Leasehold Reform Act 1967, as amended by the Leasehold Reform (Housing and Urban Development) Act 1993, and there is evidence before the court from an expert surveyor to the effect that an exercise of the right to acquire the freehold would be favourable to the patient's estate, because the increase in value of his resulting interest in the house would be considerably greater than the cost likely to be involved in purchasing the freehold.

The freeholder in relation to the house in fact disputes the claim made on behalf of the patient to acquire the freehold, and proceedings, as I understand it, have already been started in the County Court in an attempt to establish the patient's right. Counsel has advised that those proceedings have a good prospect of success. In the light of this evidence, it seems to me clearly to be shown to be in the interests of the patient to pursue the proceedings in the County Court to establish his right to acquire the freehold. The Official Solicitor, whose counsel I have had the benefit of hearing on behalf of the patient, agrees with that view and supports the application.

However, the present application has become necessary because the patient's wife, as attorney, cannot herself, without further authority, effect the proposed purchase of the freehold because of the £50,000 limit imposed on the power. The purchase price for the freehold is likely to be in the order of £1.8 million. Therefore the attorney seeks the court's authority to effect the transaction.

No receiver has been appointed in respect of the patient's affairs, because up until now the power of attorney has proved adequate as enabling the patient's wife to administer his affairs without the need of supervision by the court.

The patient's wife, as attorney, submits by counsel, Mr Rowell, on her behalf, that the court has power to authorise her to effect the proposed purchase of the freehold interest in the patient's house under sections 95 and 96 of the Mental Health Act 1983

Section 95(1) provides:

"The judge may, with respect to the property and affairs of a patient, do or secure the doing of such things as appear necessary or expedient -

(a) for the maintenance or other benefit of the patient;

(b) for the maintenance or other benefit of the patient's family;

(c) for making provision for other persons or purposes for whom or which the patient might be expected to provide if he were not mentally disordered; or

(d) otherwise for administering the patient's affairs.

Section 96(1) provides:

"Without prejudice to the generality of section 95 above, the judge shall have power to make such orders and give such directions and authorities as he thinks fit for the purposes of that section and ill particular may for those purposes make orders or give directions or authorities for -

and then a list of transactions is set out in the section, including in particular:

"(c) the acquisition of ally property in the name or on behalf of the patient", and

"(i) the conduct of legal proceedings in the name of the patient or on his behalf.

In my judgement there is no doubt that the court does have power under sections 95 and 96 to give authority for the acquisition on the patient's behalf of the freehold interest in his house and for the conduct of any necessary legal proceedings in the patient's name designed to establish the right to acquire the freehold. Indeed, neither counsel, each of whom made extremely helpful submissions to me, suggested to the contrary, and in my judgement the point is clear. The court does have power to give authority, such as is sought, under section 95 as amplified by section 96.

The question then arises as to who should be authorised to carry out the transaction of acquiring the freehold and conducting the legal proceedings on the patient's behalf. One possibility, contemplated by section 99 of the Mental Health Act 1983, is that the person authorised to carry out any transaction for which the court gives authority under section 95 or section 96 should be a receiver appointed by the court. Section 99(1) provides that:

"The judge may by order appoint as receiver for a patient a person specified in the order or the holder for the time being of an office so specified",

and subsection (2) provides that:

"A person appointed as receiver for a patient shall do all such things in relation to the property and affairs of the patient as the judge, in the exercise of the powers conferred on him by sections 95 and 96 above, orders or directs him to do and may do any such thing in relation to the property and affairs of the patient as the judge, in the exercise of those powers, authorises him to do.

However, it is clear, in my judgement, that the court can make an order under sections 95 and 96 authorising the effecting of a transaction on behalf of a patient without necessarily appointing a receiver, and, in my judgement, the court should give that authority without appointing a receiver, in the interests of saving the costs and possible inconvenience and embarrassment of a Court of Protection receivership in a case such as the present, where the authority sought under sections 95 and 96 is for a one-off transaction that can perfectly well be dealt with by the attorney on behalf of the patient and where there is no reason shown for the court's imposing any further supervision over the attorney's management of the patient's affairs in future under the enduring power.

There may well, of course, be other cases, on other facts, where, on an application under sections 95 and 96, it appears to the court that a receivership is appropriate for the benefit of the patient, because for some reason the general administration of the patient's affairs cannot sensibly or properly be left to be dealt with by an attorney appointed by the patient. In the present case there seems to me no possible reason shown by the evidence for appointing a receiver, having regard to the perfectly satisfactory way in which, so far as the evidence discloses, the patient's own choice of delegate as his attorney has been able to carry out (and has carried out) any necessary acts in dealing with the patient's affairs for his benefit.

That the court can step in to authorise a transaction under sections 95 and 96 of the Mental Health Act 1983, without necessarily revoking an enduring power of attorney that the patient may have made before becoming a patient, is clear in my judgement from section 2(11) of the Enduring Powers of Attorney Act 1985. That subsection provides:

"An enduring power shall be revoked on the exercise by the court of ally of its powers under Part VII of the Mental Health Act 1983".

(and I interpose to say that includes powers under sections 95 and 96)

"if, but only if, the court so directs. "

Clearly the court has a discretion whether, on exercising its powers under Part VII of the Mental Health Act, and in particular its powers under sections 95 and 96, to bring to an end any enduring power of attorney there might be otherwise in existence. It may well be (and I would have thought in most cases will be) that, if the court thinks it appropriate on an application under Part VII of the 1983 Act to appoint a receiver for the purposes of the general administration of the patient's affairs in future, the court will think it appropriate to bring to an end any enduring power of attorney. However, that is not this case, as I have already said, and I see no reason in the present case why, in exercising its powers to authorise a transaction such as that concerned in the present case, under sections 95 and 96 of the 1983 Act, the court should interfere with the future operation of the enduring power of attorney, which has worked perfectly well in the past, and so far as one can tell will work perfectly well in the future, save only for the inhibition placed on the exercise of the power of attorney by the £50,000 limit.

In the present case, as no doubt in any future case where it is desired to effect a transaction outside that limit, an application has to be made to the court under sections 95 and 96 of the Mental Health Act 1983. That, in my judgement, is no good reason, of itself, for either appointing a receiver or bringing the power of attorney to an end. For, even if a receiver were appointed, as is rightly pointed out to me by both counsel, any such transaction as that concerned in the present case is not one that the receiver could carry out without him or herself making an application for specific authority to do so under sections 95 and 96 of the 1983 Act.

Accordingly, I see no problem in the present case in the court, under section 95 and section 96 of the Mental Health Act 1983, authorising the attorney appointed by the patient himself to pursue the proceedings already commenced to establish the patient's right to acquire the freehold interest in his house, and to effect such acquisition, without the appointment of a receiver and without any revocation of the power of attorney.

In my judgement, for the reasons I have already indicated, the evidence discloses very good reason why the court should take this course in this case and that course I propose to adopt. ...

One further point arises in this case, and that is that the proposed expenditure of money on the purchase of the freehold interest in the patient's house may have an effect on the respective interests of the patient's wife, on the one hand, and his two daughters on the other, under the existing will of the patient. For, under that will, the house is given specifically to the patient's wife, whereas his residuary estate is given only as to four-fifths to his wife, the remaining one-fifth being given to his two daughters or their issue in equal shares per stirpes. Clearly the expenditure of money (and a not insignificant sum of money even in the context of the patient's present estate) out of his assets, for the purpose of enhancing the value of the house, will, if circumstances otherwise remain unchanged at the patient's death, increase the value of the benefits given to the patient's wife by his will, at the expense of those given to his daughters.

There is included in the evidence before me a copy of a letter from each of the two daughters expressing support for the present application. However, it is not clear that, in being invited to express her support, either daughter was in fact told of the possible effect of the proposed transaction on her interest under her father's will. I do not for one moment suggest that, had she been told, either daughter would have taken a different view, but T do feel some slight concern at the prospect of the daughters having expressed their support for the proposals and possibly subsequently discovering that they had implications which they did not understand at the time.

In these circumstances counsel have suggested to me that it would be possible for me to protect the daughters' position by making an order under section 101, subsections (5) and (6) of the Mental Health Act 1983, having the effect of charging the patient's interest in the house with payment to the attorney, as a trustee for his general estate, of a sum of money equal to that to be spent on the acquisition of the freehold interest in the patient's house. The effect, of course, of that would be to prevent the proposed transaction depleting the patient's residuary estate for the benefit of those who ultimately take his house, whose value will be increased by the operation.

Counsel on behalf of the attorney, if I may say so, extremely properly indicated that the attorney would have no objection to the court making an order imposing such a charge, and in the circumstances it seems to me appropriate that I should do so.

Denzil Lush, Master of the Court of Protection.