LPAs: Open to abuse?
Lasting powers of attorney ("LPAs") have been around for over five years now. LPAs are a wonderful tool for enabling people to delegate powers to an attorney to act in their best interests in the future should they lack capacity to make decisions themselves. Of course, attorneys have certain duties and must act within the scope of the powers set out in the LPA. The authority conferred by the LPA is subject to the provisions of the Mental Capacity Act 2005 and attorneys must have regard to the Code of Practice.
As a result, the usual scenario is that LPAs are used effectively and appropriately by attorneys. However, a few recent cases have been heard in the Court of Protection where attorneys have not complied with their duties and have abused their position.
In this note, we:
- consider the safeguards that are built into LPAs;
- consider some of the recent cases involving abuse by attorneys;
- look at some of the practical points that arise from these cases to consider the risk factors for abuse, what can be done to prevent it and what to do where there are concerns of abuse.
(This note focuses on property and financial affairs LPAs rather than health and welfare LPAs).
From 1 October 2007, it was possible to create an LPA and no longer possible to create a new EPA. There had been concerns about EPAs that they were short and simple documents; to a degree they were too easy to complete without sufficient focus being given by the donor as to who they were appointing as an attorney or to the capacity of a donor to enter into the power. There were also concerns that EPAs were at times being created on behalf of people already lacking capacity and that there were insufficient safeguards in place to prevent this.
One of the safeguards introduced with LPAs is that a donor can name up to 5 people to be informed when an application is made to register the LPA. Those named people can then object to the registration on specified grounds which include (amongst others) that fraud or undue pressure was used to induce the donor to make the power or that the attorney proposes to behave in a way that would contravene his authority or would not be in the donor's best interests. If the donor chooses not to identify any people to be notified, then s/he must involve not one but two certificate providers in creating the LPA. The fact that the donor has free choice of the identity and number of people to be notified is intended to be an improvement on the position in relation to EPAs, where notification had to be made in accordance with a fixed kinship list. However, a donor who has been the victim of fraud or undue pressure might 'choose' persons to be notified who would not protect him by objecting to registration.
A further safeguard is the need for a certificate provider to be involved in the execution of an LPA (not previously required with EPAs). A certificate provider must certify that the donor understands the purpose of the LPA and the scope of the authority; that no fraud or undue pressure is being used to induce the donor to create the LPA; and there is nothing else that would prevent the LPA being created. Guidance notes produced by the Office of the Public Guardian ("OPG") set out possible questions that a certificate provider can ask a donor in trying to reach their conclusions before signing the LPA.
The certificate provider must have known the donor personally for at least two years as more than an acquaintance (a knowledge-based certificate) or be someone who on account of his professional skills considers that he is competent to make the judgements necessary to provide the certificate (a skills-based certificate). In order to prevent influence, certain people cannot act as a certificate provider including the following:-
- A family member of the donor
- An attorney or replacement attorney named in the LPA
- An attorney or replacement attorney named in any other LPA or EPA which has been executed by the donor (even if revoked and never used)
- A family member of any of the donor's attorneys or replacement attorneys
- A director or employee of a trust corporation acting as an attorney or replacement attorney in the LPA
- A business partner or paid employee of the donor or of any of the donor's attorneys or replacement attorneys
- An owner, director, manager or employee of a care home in which the donor is living when the LPA is executed or a member of their family
In cases where there is a dispute over the validity of an LPA, it is likely that the Court will consider the evidence of the certificate provider (contemporary with the decision) and weigh it against evidence of a medical expert (prepared after the event). In several recent cases, the Court has preferred the evidence of certificate providers even though they were not expert medical witnesses, because their evidence was decision and time specific. Certificate providers should therefore be encouraged to keep clear notes of their discussions with the donor at the time they sign the LPA with an explanation of how they reached the decision that enabled them to provide the certificate. These notes should be kept for as long as is necessary and at least until the LPA is registered in case there is a challenge over the validity of the LPA.
Further provision introduced into LPA forms are sections where the donor can give guidance to the attorneys and confirm that they have agreed that the attorney can charge for his services and the basis on which that is to take place, in order to avoid confusion later on. This was intended to reduce disputes over attorney fees but inevitably, such disputes do still occur.
The Law Society's practice note on LPAs (8 December 2011) states:
"You should, when advising clients of the benefits of LPAs, also inform them of the risks of abuse, particularly the risk that the attorney could misuse the power. You should discuss with the donor appropriate measures to safeguard against the LPA being misused or exploited. You may also notify other family members or friends (who are not named persons to be notified of an application to register the LPA) of the existence of the power, why they have chosen the attorney and how the donor intends it to be used. This may help to guard against the possibility of abuse by an attorney and may also reduce the risk of conflict between family members at a later stage."
Have the safeguards worked?
The safeguards have been a useful step forward. However the LPA scheme is essentially based on trust and envisages a minimal intervention by public authorities. The Court would not usually exercise its supervisory powers (for example under section 23 of the Mental Capacity Act to request reports/accounts/records) unless it has reason to do so, possibly because of concerns raised by the OPG.
Further on, we consider how the OPG itself becomes aware of possible abuse and what it can do if concerns are raised. First, we will look at some of the recent cases where attorneys have been found to have contravened their authority and acted in a way that was not in the donor's best interests.
Re Harcourt; The Public Guardian v A (31 July 2012)
Re Stapleton; the Public Guardian v (1) Stapleton (2) ABC Borough Council (3 July 2012)
Re Buckley; The Public Guardian v C (22 January 2013)
How often are concerns raised with the OPG?
Are these cases unusual? The Compliance Unit at the OPG deals with complex cases and in particular, investigations into concerns about deputies and attorneys. According to the OPG's Annual Report for 2011/12, they received 3,653 referrals in 2011/12 compared to 2,566 in 2010/11 which is a 42% increase. The majority of investigations undertaken were into an individual acting under a single deputyship order or power of attorney. The unit also carried out 32 investigations into professional and public authority deputies and attorneys, involving over 1,000 cases.
(To put these numbers into context, the Business Plan for 2013/14 recently published by the OPG reports that 21,000 LPAs and EPAs were registered each month in 2012/13.)
The Annual Report for 2011/12 says that the vast majority of investigations undertaken that year were into allegations of financial abuse. Of the referrals received by the Compliance Unit, 38% were received from concerned relatives or friends, 24% from local authorities, 9% from solicitors and 9% from attorneys or deputies (usually to report concerns about a co-attorney or co-deputy or third party). The remaining 20% of referrals came from banks, doctors, advocates, carers and the police.
Outcomes from the OPG's investigations included:
- 94 applications to the Court of Protection to discharge deputies or to revoke EPAs/LPAs.
- 5 other types of Court application, eg to freeze bank accounts or to obtain an Order directing the deputy/ attorney to account to the Public Guardian.
- 74 cases where the investigation found no evidence of the deputy/ attorney acting inappropriately.
- 2 cases where the Public Guardian has written a formal instruction to deputies/ attorneys to comply with the requirements of their role or face further action.
The Annual Report for 2011/12 states that "this year has seen a shift in approach towards seeking agreed outcomes where these work in the best interests of the person lacking capacity. For example, in some cases the Public Guardian has sought directions from the Court which introduce additional scrutiny of the attorney or deputy without removing them from their role, and in other cases, sought agreement between co-attorneys about how they will work together in the future, or an undertaking about the level of expenses and any future gifting."
"In….4 Attorneyship cases in 2011/12, it has been possible to negotiate a Consent Order between the Parties, which has then been submitted to the Court to be considered and approved by the judge. This has often resulted in better outcomes for clients in terms of reducing legal costs and being able to retain family members in charge of their affairs, No party has the stress of having to travel to attend a hearing and of course, the time of the Court is not wasted."
"However, at the other end of the spectrum, where assets have been at risk of misappropriation, the Public Guardian has not shied away from making emergency 'without notice' applications under the Court of Protection Rule 81. 12 such applications were made in the course of the year. In a number of cases the deputy/attorney was suspended, and/or bank accounts frozen, pending the completion of OPG or in some cases, police investigation."
The OPG's Business Plan for 2013/14 refers to their objectives for the coming year, one of which is "to take prompt and effective action where concerns are raised about an attorney's or deputy's actions." They aim to achieve this through the following activities:
- Conduct or commission a review of wider research around the safeguarding of vulnerable adults in order to support the review of supervision and the effective focus of their safeguarding resources (by June 2013).
- Enhance the current notification process about a deputy or attorney's actions, so that the concern-raiser receives prompt notification of the OPG's intended action (by March 2014).
- Reduce the average time taken to conclude investigations into the actions of a deputy or attorney and carry out the recommendations made to the Public Guardian (by March 2014).
- Review and re-launch their safeguarding vulnerable adult's policy (by June 2013).
Choosing an attorney
It is clearly important for clients who wish to execute an LPA, to consider very carefully who they want to appoint as an attorney. The OPG says in its guidance for people who want to make a lasting power of attorney for property and financial affairs that: "Being your attorney is an important role. You need to be sure that the person you choose knows you well enough to make decisions on your behalf that are in your best interests. You must be able to trust them. You also need to make sure that the person is happy to take on the role… Your attorney could be anyone aged 18 or over, for example a family member, friend, a professional, your spouse, partner or civil partner."
The practicalities should be thought through. As well as choosing someone who the donor trusts, consideration should be given as to whether the chosen attorney has the skills and knowledge to undertake the role, whether they have sufficient time to take on the role, whether they are in good health and ideally it should be someone who lives nearby.
Consideration should be given as to the suitability of appointing a family member or someone independent or a combination of both. The appointment of a sole attorney may provide greater opportunity for abuse than appointing more than one attorney. It is important for the donor to discuss the appointment with the chosen attorney to ensure they are willing to take on the role and understand what it will involve. A donor cannot insist on somebody agreeing to become their attorney (however, once the attorney accepts the role and signs the LPA, this is confirmation that they are willing to act once the LPA is registered, subject to their ability to withdraw from acting).
When the attorney signs the LPA, he must confirm that he has read the prescribed information and that he understands the duties imposed on him under section 1 of the Mental Capacity Act and under section 4 (section 1 sets out the principles and section 4 relates to best interests). An attorney must also follow the Code of Practice. The attorney should be aware of his duties and also be aware of the limits of his authority (e.g. the limited extent of gift making allowed under section 12 of the Mental Capacity Act).
It is more common for an attorney not to comply with his duties because of a lack of an understanding of what those duties are or as a result of a lack of skills about acting as an attorney rather than an attorney who specifically intends to abuse their position. It is therefore important for practitioners to ensure that attorneys are fully aware of their duties and of what the role involves. It is important for attorneys to realise that they act as a fiduciary and must act in the donor's best interests. That is not the same as taking decisions (such as investing in a reptile breeding business) that the attorney thinks the donor would have taken had he had mental capacity.
So what duties does an attorney have? He must act within the scope of the powers set out in the LPA. The authority is subject to the Mental Capacity Act 2005, in particular, section 1 (the principles) and section 4 (best interests). An attorney must also have regard to the Code of Practice. Attorneys have a duty:
- of care
- to carry out the donor's instructions
- not to take advantage of their position
- not to delegate unless authorised to do so
- of good faith
- of confidentiality
- to comply with directions of the Court of Protection
- not to disclaim without notifying the donor, other attorneys and the Public Guardian
- comply with the relevant guidance
- keep accounts
- keep the donor's money and property separate from their own
- apply certain standards of care and skill
And what authority does an attorney have to make gifts? An attorney is limited in his ability to make gifts of the donor's money by the provisions of section 12 of the MCA 2005. A gift to charity can be made at any time of year, if the donor previously made gifts to that charity or might be expected to make gifts if he had capacity. Gifts to individuals can only be made on customary occasions (births or birthdays, weddings or wedding anniversaries, civil partnership ceremonies or anniversaries, or any other occasion when friends, families or associates usually give presents) and they can only be made to people who are related to or connected to the donor. The value of the gift must be reasonable and take into account the size of the donor's estate.
The donor cannot confer a wider gift making authority on the attorney than that set out in section 12. A donor can exclude or restrict the gift making authority set out in section 12. Guidance can be included in the LPA on the circumstances in which gifts can be made but this should not exceed the limits set out in section 12. An example of such guidance which failed to achieve its objective can be found in Re Barac SJ Lush 20 February 2013. In that case the donor made an LPA for property and financial affairs which included the following provision: "After having taken full regard for my financial welfare and security I want my attorneys to take sensible steps to protect my estate from the effects of taxation [e.g. Inheritance Tax] and be able to create Trusts where beneficial." On the application of the Public Guardian the provision was severed on the ground that it contravened section 12 of the MCA 2005. Another example is Re Rider SJ Lush 20 February 2013. The donor made an LPA for property and financial affairs which included the following provision: "No political donations to be made other than to the conservative party." On the application of the Public Guardian the provision was severed on the ground that it contravened section 12 of the MCA 2005. While section 12(2)(b) (The donee may make gifts . . . .(b) to any charity to whom the donor made or might have been expected to make gifts) permits the making of gifts to charities (subject to certain conditions), donations to the Conservative party, or any other political party, would not fall within that provision. Finally, in Re Buckley SJ Lush 22 February 2013, the donor made an LPA for property and financial affairs and included the following provision: "Assets should be used firstly to ensure the well being and comfort of [my wife] and secondly to meet any urgent need of the families of the Attorneys and thereafter managed until distributed in accordance with the terms of my will." On the application of the Public Guardian the provision was severed. Although the attorneys would have power to maintain the donor's wife, this should not be the priority of the LPA because section 1(5) of the MCA provides that "An act done, or decision made, under this Act for or on behalf of a person who lacks capacity must be done, or made, in his best interests." The attorneys had no authority to meet the needs of their families, as the donor was not under any legal obligation to maintain them. Any maintenance of the families would be a gift which would potentially fall outside section 12 of the MCA 2005.
If an attorney wishes to make a gift that is outside section 12, such as for tax planning purposes, he must apply to the Court of Protection for permission. The Court will look at the donor's particular circumstances in deciding whether to grant permission. In the recent decision of Re GM the Court considered gifts made by deputies and indicated that the following tax planning gifts would be regarded as de minimis within the meaning of the decision in re Buckley:-
- The annual IHT exemption of £3,000 and the annual small gifts exemption of £250 for up to 10 people, in the following circumstances
- Where P has a life expectancy of less than 5 years
- Where P's estate exceeds the nil rate band for IHT
- The gifts are affordable having regard to P's care costs and will not adversely affect P's standard of care or quality of life
- There is no evidence that P would be opposed to gifts of this magnitude being made on his/her behalf
It would be reasonable to regard this guidance as applying equally to attorneys as to deputies
If an attorney makes unauthorised/ excessive gifts, the Public Guardian may request that the attorney seeks the return of those gifts; or instruct the attorney to apply for retrospective approval (which should not be regarded as a foregone conclusion); or apply to the Court for the removal of the attorney.
Many practitioners now advise clients not to include any restrictions or conditions in an LPA in case they are subsequently rejected by the OPG on an application to register the LPA. However, it can be useful to include restrictions or conditions in order to minimise the risk of abuse by an attorney. For example, it may be helpful and appropriate to include a supervisory condition whereby the attorney must provide financial records or accounts to someone who is independent or a requirement that the attorney seeks independent financial advice. However, any restriction which effectively requires arbitration of attorneyship issues by a third party e.g. a provision which requires an accountant or solicitor to adjudicate over the donor's business affairs, or a provision which requires all of the donor's children to agree to decisions, when not all have been appointed attorneys, will be severed as a restriction fettering the attorney's authority.
Can use of the 'guidance' section avoid the risk of severance of a questionable restriction? No - if the guidance is in mandatory terms, it will still be considered as if it were a restriction, as illustrated by Re Bishop SJ Lush 28 February 2013. The donor appointed attorneys to act jointly and severally and included the following provision: "I direct that my attorneys shall endeavour to act jointly on decisions wherever possible. They must only act severally when all practicable steps to act jointly have been made without success. If an attorney must act severally then that attorney must consult the other before making the decision and keep the other informed of any decision made." On the application of the Public Guardian the provision was severed as being incompatible with a joint and several appointment.
The Ministry of Justice website publishes decisions of the Court of Protection on severance of restrictions which are invalid or incompatible with the provisions of an LPA.
How does the OPG become aware of possible abuse?
The OPG may be alerted to concerns about abuse by an attorney from a number of sources including by a relative or friend or neighbour of the donor, a member of staff if they are living in a care home, a Court of Protection visitor etc. The matter would be referred to the Supervision Division of the OPG who would carry out an initial assessment of the situation and consider the risk to the person concerned. The matter is then referred to the Compliance and Regulation team. The OPG's response will vary depending on the situation. It may investigate the matter further, consider whether to refer the matter to the adult care social services or to the police or it may make an application to the Court of Protection. An application to the Court can be for the revocation of an LPA or for interim relief pending an investigation.
Initial concerns can be raised with the Compliance Unit at the OPG on their dedicated phone line 0115 934 2777. Indicators of financial abuse can include the following:-
- Unpaid bills, overdue rent, unpaid care home fees, when there is someone who is supposed to be paying those.
- Shortage of money
- Unexplained withdrawals from an account
- Unexplained transfer/ sale of the donor's possessions/ assets
- A sudden change in the donor's living arrangements and/or conditions
- Cut off from family, friend, carers, healthcare staff
- Applications for un-needed credit cards
These factors do not automatically mean that actual abuse has occurred but may raise concerns. Certain people are more at risk including those over the age of 75, females, living alone and estranged from children. These indicators of abuse are set out in detail in appendix 1 to the OPG's "Safeguarding vulnerable adults policy".
When concerns are raised with the OPG about the possible abuse of a vulnerable adult, reference should be made by the staff to their guidance "OPG safeguarding vulnerable adults procedures and guidance". There is a useful flow chart at appendix 1 of that guidance which details the process for action in response to suspected or alleged abuse.
Professional conduct issues for legal advisors
So what should we be aware of as practitioners? The helpful guide prepared by Solicitors for the Elderly headed "A safeguarding strategy for recognising, preventing and dealing with the abuse of older and vulnerable people" includes the following advice:-
- Advisors should handle a matter with care and sensitivity as a client may not be prepared to take your advice due to the nature of the abuse.
- Clients do not like or indeed may be unwilling to admit abuse by others, for example, in relation to financial abuse.
- A client may need additional help and support, both emotionally and practically.
- Abuse is often "hidden" so do not always take the situation at face value.
- Consider where there are risks for abuse.
- Abuse may start by being unintentional and the abuser may rationalise the abuse, for example using the client's money for their benefit, as an advancement of their inheritance entitlement.
- People may not like airing their dirty linen in public and may rectify abuse by internal management.
- The client may be subject to different forms of abuse and the solution may involve a number of public bodies and/or legal proceedings.
Solicitors for the Elderly offer the following advice to advisers (such advice to be tailor made to each client's circumstances and needs):-
- In some cases the outcome for a client may be better were the Court to appoint a deputy rather than the client making an LPA because of the supervision given by the OPG where a deputy is appointed and the Court's requirement for a security bond to protect against mismanagement by a deputy (such security bonds are not required for attorneys). This can be relevant where a client has a history of being exploited or where their relevant relationships are dysfunctional.
- It is necessary to be careful when receiving instructions for LPAs especially if those come from a third party or where the donor is previously unknown to the practitioner. Third party instructions must always be confirmed by the donor and it is important to see the client alone for at least part of the meeting to consider capacity and to ensure the client is free from influence of others.
- It can help to build in protection when drafting an LPA so that there is accountability and external supervision of an attorney. For example, inserting a condition in the LPA that an attorney must produce accounts to a third party.
- The suitability of the attorney should be discussed with the donor carefully. The appointment of a sole attorney provides more scope for abuse than a joint or several appointment; a joint and several appointment provides a greater opportunity for exploitation than a joint appointment due to there being less accountability.
- The donor and the attorney should be made aware of the limits of the power.
- As an advisor, it is necessary to confirm with the donor the circumstances in which an LPA is to be used so that it can be released to the attorney at that point.
Changes implemented in April 2013
A brief mention ought to be made here to a number of changes that are taking place in relation to LPAs. This followed a consultation in 2012.
Some of the questions in the consultation referred to the requirement for certificate providers. Question 7: Should the requirement for an additional certificate provider, in circumstances where the donor has not specified any named persons, be removed? Based on the answers given, the OPG concluded that a second certificate provider remains an important safeguard to ensure that the donor understands the significance of the LPA and is not under any undue pressure or that any fraud is involved in the making of the LPA application and so the requirement should remain.
As of 1 April 2013, the minimum length of time for the OPG to register an LPA has been reduced. The "statutory waiting period" is now 4 weeks rather than 6 weeks. People who are entitled to object to the registration of an LPA now have 3 weeks in which to do so rather than 5 weeks.
An on-line tool for creating LPAs is being introduced in order to make the process simpler, clearer and faster and to reduce errors in LPA forms that reach the OPG requiring correction. Paper forms will continue to exist but it is likely that a significant number of people will create LPAs using the new on line tool (although people who are digitally disadvantaged will find this difficult). However, many practitioners have concerns over whether there are sufficient protections in place to prevent fraudulent use of the digitalised system.
LPA's remain an extremely useful mechanism for enabling people to appoint an attorney to make decisions on their behalf at a time in the future when they may lack capacity. There are instances of financial abuse by attorneys (although relatively rare) and we should all be aware of the steps that practitioners can take to minimise the risk of such abuse as well as being alert to the signs of financial abuse. The OPG are clearly alert to the possible risks and their aim is to reduce the time they take to investigate and to carry out recommendations.
This article was originally delivered at an ACTAPS Seminar on 13 May 2013 hosted by Boodle Hatfield. It then appeared in the ACTAPS Newsletter Issue 163 in June 2013.
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