Husband (“Bill”) was born on 20 February 1921 and died on Monday 16 November 2015,
His widow, (“Betty”), was born on 22 September 1927, living in a two-bedroom bungalow in Basingstoke, Hampshire. She has two daughters and son, namely:
(a) Theresa, who is 64, lives in Hampshire, and used to be a PE teacher.
(b) Susan, who is 62 and lives in Basingstoke. She suffers from bipolar disorder and fibromyalgia.
(c) Stephen, who is 58 and lives in Berkshire. He is a retired fireman.
On 22 October 1999 Bill and Betty each signed an Enduring Power of Attorney (‘EPA’), in which they appointed all three of their children to be their attorneys.
On 12 September 2007 each of them signed another EPA, in which they revoked the earlier EPA and appointed Theresa and Stephen to be their attorneys jointly (rather than jointly and severally) with general authority to act on their behalf in relation to all their property and affairs.
In 2008 Bill and Betty were both diagnosed as having Alzheimer’s dementia.
In 2009 the attorneys applied to the Office of the Public Guardian (‘OPG’) to register the two EPAs- no objections and the instruments were registered on 6 October 2009.
Assets - bungalow is said to be worth about £275,000. In addition, life savings of about £50,000.
Their joint income during the financial year 2014/15 was £29,077 (mainly state retirement pensions and attendance allowances). Their expenditure over the same period was £21,356, and this included the sum of £5,400 paid by way of a monthly allowance of £150 to each of their children.
Each year’s accounts from 2008/09 onwards show a transfer of £6,000 to a ‘contingency care fund’. This fund consisted of two savings accounts, one of which was in Theresa’s name and the other was in Stephen’s name. £6,000 represented the annual exemption of £3,000 in respect of each of their parents’ estates under section 19 of the Inheritance Tax Act 1984, and the purpose of the fund was to top-up the care fees, if either of their parents went into residential or nursing care.
The attorneys have consistently had difficulties in dealing with their sister, Susan. In 2009, when it was no longer safe for their mother to drive, they agreed to let Susan have their mother’s car. In 2014 she asked them to buy her a new car from their parents’ funds. The attorneys refused and Susan retaliated by reporting them to the OPG for siphoning away their parents’ money into the two savings accounts.
The Public Guardian carried out an investigation, with which the attorneys fully complied, and on 9 December 2014 the attorneys transferred £42,000 back into their parents’ accounts, representing seven years’ payments of £6,000 into the contingency care fund.
On 10 January 2015 the attorneys applied for the following order:
“The OPG have requested us to seek retrospective approval for £450 (per calendar month) taken for care and expenses from the joint account of Bill and Betty, i.e. each sibling receives £150 pcm (Theresa, Susan and Stephen).
To grant the above approval and agree to the continuation of this arrangement (or some other form of calculation the court deems fit and proper). Without some form of financial support the level of care we provide to maintain our parents in their own home would be unsustainable.
This is the most economical way of supporting our parents. If we had to rely on outside agencies to do the tasks we do out of love for our parents the cost to their estate would be far greater.”
The application was accompanied by a witness statement, composed by Theresa, but signed by both of them, saying:
“We are extremely disappointed to be making this application for retrospective permission for the £150 for each of us (Bill and Betty’s three children) for travel and expenses from their joint estate. Equally we are angry that the money we have saved from their estate for third party ‘top up’ fees has been paid back into their estate. In our view the OPG have forced us to act against the best interests of our parents. We now have no flexibility in choosing future care homes.
Our parents wish to remain together in their own home for as long as possible, and all our decisions and actions have been to that end. The £450 we have taken for care and expenses is a fraction of the cost had we involved outside agencies.
You will note that none of the above arrangements have been ‘hidden’, and we have tried to keep comprehensive records of all transactions and receipts in a perfectly open manner, and retaining all bank statements and receipts.
Despite engaging care agencies in 2013 to oversee medication and meals, this has not reduced our own weekly tasks. Indeed, now that our parents are under greater observation, our ‘emergency’ calls have increased. The carers have informed us of various problems which necessitate extra journeys in order to solve them.
We registered the EPA in October 2009 and in October 2010 we arranged for ourselves and my sister Susan to receive £150 per calendar month to offset travel and care expenses from the joint account of my mother and father. Prior to the above date and for the previous eight years, the three of us had undertaken all tasks relating to our parents’ care without recompense from their funds. However with the degeneration of their condition, care became more intensive, petrol prices increased considerably and, as my parents lost the capacity to drive, this was not economically sustainable.”
Re Travel expenses
“We based our calculations on a mileage of 45p (this appears to be the AA choice), on an average two visits per week for my brother and myself and four to five visits for my sister, who is much closer. These visits are for basic care issues, gardening, house cleaning, taking meals etc.” Further details set out the mileage incurred by both attorneys.
In the final section of her witness statement, Theresa went on to itemise additional costs that she and her brother had incurred in connection with the actual management of their parents’ financial affairs.
“My husband and myself conduct the administration with regard to our parents’ estate. This involves dealing with:-
In a recent letter, the OPG states: “Decisions should always benefit the donor.” If we had employed outside agencies to cover the tasks we have done throughout the years, out of duty and love for our parents, a great deal more of their finances would have been spent.
The OPG now requires us, and I quote: “to make an application to the Court of Protection seeking retrospective approval for this expenditure, i.e. £150 per calendar month for each of the three children.”
We had no idea we had to apply to the Court of Protection for such decisions. We assumed such decisions were within our provenance. If EPA’s have to make such applications at a cost of £400 each time, is this not unfair to the donors of the EPA?”.
The accountant’s witness statement
Gerald John Bishop, BSc, FCA, who is a chartered accountant based in Abbots Langley, Hertfordshire was instructed by the attorneys when the OPG began its investigation into their conduct.
On 4 September 2015 Mr Bishop made a witness statement, in which he said:
"I am informed that at least two major family disputes have occurred in front of the donors this year. This is most unsatisfactory in relation to the care and wellbeing of the elderly donors…..
It is likely there has been an irretrievable breakdown within the family regarding the care and well being of the donors. As a consequence I have advised the petitioners to seek the court’s direction to prevent the siblings visiting their parents at the same time until their differences have been amicably resolved.
Both attorneys have informed me that Susan has repeatedly asked for financial help from the estate with a clear preference for cash payments throughout the period. If this is the case it may well partially explain the breakdown in normal relations between the brother and two sisters.
In conclusion I do not consider that the two attorneys have profited from their duties in administrating the affairs of their parents. I am unable to determine if the same can be said of the third sibling Susan given that I have had no explanations in relation to her funding.
Both attorneys devote considerable time and effort to the care and administration of the donors’ affairs. They have refunded £1,350 each to the estate following my letter dated 22 August 2015. They seek the court’s direction both in relation to these funds already expended on the donors’ behalf since December 2014 and going forward into the future.”
The sum of £1,350 was the monthly payment of £150 that each of the attorneys had taken during the nine months from December 2014 to August 2015. They had stopped making these payments in August 2015, not only to themselves but also to their sister, Susan.
The court explained that it was seeking to achieve is a neutral position whereby they are not financially at a disadvantage through acting as their parents’ attorneys, but they are not actually making a profit from their role.
Paragraph 7.60 of the Mental Capacity Act Code of Practice was considered, which says that:
“Attorneys must not take advantage of their position. Nor should they put themselves in a position where their personal interests conflict with their duties. They also must not allow other influences to affect the way in which they act as an attorney. Decisions should always benefit the donor, and not the attorney. Attorneys must not profit or get any personal benefit from their position, apart from receiving gifts where the Act allows it, whether or not it is at the donor’s expense.”
The court then dealt with the heads of claim in the following order concerning the monthly allowance:
- travelling expenses;
- remuneration for acting as attorneys; and
- a ‘gratuitous’ care allowance.
The front page of the EPAs that Bill and Betty signed on 12 September 2007 contained some prescribed explanatory information, paragraph 6 of which stated:
“Your attorney(s) can recover the out-of-pocket expenses of acting as your attorney(s). If your attorney(s) are professional people, for example solicitors or accountants, they may be able to charge for their professional services as well. You may wish to provide expressly for remuneration of your attorney(s) (although if they are trustees they may not be allowed to accept it.”
Bill and Betty did not provide expressly for their attorneys to be remunerated. I expect, like most parents of their generation, they assumed that Theresa and Stephen would carry out these duties gladly and gratuitously, without complaint or expectation.
Paragraph 16(2)(b)(iii) of Schedule 4 to the Mental Capacity Act 2005, which applies exclusively to EPAs, provides that:
“(2) The court may –
(b) give directions with respect to –
(iii) the remuneration or expenses of the attorney whether or not in default of or in accordance with any provision made by the instrument, including directions for the repayment of excessive or the payment of additional remuneration.”
The origin of this provision can be found on page 46 of the Law Commission’s report, The Incapacitated Principal (Cmnd. 8977), which was published in July 1983. The report stated that:
“We recommend that the court should have jurisdiction … to give direction as to the attorney’s remuneration and payment of his expenses as attorney. We propose that an EPA should be able to contain whatever terms as to remuneration and expenses the parties wished. Indeed we would regard it as desirable that the EPA should state whether or not the attorney was to be remunerated and, if so, on what basis. [There was a footnote, numbered 193, which is set out in the following paragraph]. Even if the EPA did not make specific provision, however, it is clear that problems could still arise. For example, the awarding of a fixed annual fee might prove unsatisfactory in the light of inflation or, indeed, if it assumed a large volume of work which never materialised. But even providing for ‘reasonable remuneration’ would leave open the question of what was reasonable in any given case. We therefore recommend that the court should be able to give directions generally as to the attorney’s remuneration and expenses (whether or not the EPA made specific provision) to cover such matters as the repayment by him of excessive remuneration and the payment to him of additional remuneration. Thus the attorney would have to apply to the court for directions if he wanted to claim remuneration in excess of that (if any) to which he was entitled under the power. This might happen as a result of a substantial and unforeseen increase in his duties. We would expect the court to be circumspect in considering such requests. One relevant factor would be the likelihood and relative desirability of the attorney disclaiming the power (in favour, perhaps, of [deputyship]) if his request was rejected.”
The footnote signposted in the middle of that passage stated that:
“We do not feel that the absence of such statements should automatically disentitle the attorney from a claim to remuneration or payment of expenses. It seems, for example, that an attorney under an ordinary power (containing no such statement) may be entitled to remuneration on an implied contract or on a quantum meruit basis. That is to say he may charge a reasonable fee for work done by him if there is an understanding that he would be remunerated; and an attorney (like a trustee) would always be entitled to reimbursement of costs and expenses reasonably incurred by him in the execution of his office.”
The court did not allow them any specific remuneration for the actual management of their parents’ property and financial affairs but was prepared to allow Theresa and Stephen to be remunerated for the tasks they have performed as care support workers in making it achievable for their parents to remain in their own home for as long as possible and, in Bill’s case, until his death. The court highlighted that there is a commercial value for many of the tasks they perform, and though the court would be reluctant to place a specific value on their services in the absence of a professional valuation, such as the report produced in Re HLN. The expert in Re HLN quoted an hourly rate of £13.50, which the court would normally discount by at least 20% to reflect the fact that no income tax and national insurance contributions are payable in respect of the amounts paid. However the court was satisfied “in Theresa’s case that the care support she provides and the travelling expenses she incurs merit the payment of a sum of £150 a month from her parents’ funds. Stephen does slightly less than his sister Theresa in terms of care support, but has to travel a greater distance to perform these functions and, on balance, I am satisfied that he too should continue to pay himself a composite allowance of £150 a month in respect of travelling expenses and care support.”
Accordingly the court retrospectively approved the payment of these allowances and also approved the continued payment of an allowance of £150 a month to Theresa and Stephen until further order and left it to them to exercise their discretion to reimburse Susan for any reasonable out-of-pocket expenditure she incurs and to pay her a reasonable allowance for any care support services she provides to their mother.
The court had regard to the views of other people as to what is in the donors’ best interests, and attached weight to the observations made by the chartered accountant, Gerald Bishop, who said that “both attorneys devote considerable time and effort to the care and administration of the donors’ affairs. And agreed with Mr Bishop that the payments of £150 a month each to Theresa and Stephen were in their parents’ best interests and continue to be in their mother’s best interests, because:
- the services they provided were reasonably required to meet their parents’ care needs, as are the services they continue to provide for their mother;
- the payments are currently affordable and sustainable;
- they represent a considerable saving on the commercial cost of providing these services; and
- in the absence of any express provision made by the donors in their EPAs for the attorneys to be remunerated for acting as attorneys and to be rewarded for providing care support services, these payments strike a reasonable balance between ensuring that Theresa and Stephen are not financially disadvantaged by acting as their parents’ attorneys, but that they are not actually making a profit from their position.
This case is worth reading for attorneys who may find themselves in a similar positon with elderly relatives. This summary has been set out in a full way in order to highlight the very important nature of the court’s decision and to assist those who may find themselves in a similar position as it is plain that there needs to be more clarity as to what can and cannot be claimed legitimate expenditure by attorneys.
Read the full text of the judgment on Bailii