XZ v The Public Guardian [2015] EWCOP 35

Can the Public Guardian refuse, under section 23(1) and para 11 of Schedule 1 of the MCA 2005 ( 2) – (6) inclusive, to register a lasting power of attorney for property and financial affairs due to some of the terms inserted by the donee who at the time had capacity?

In order for the Public Guardian to be correct and not register an LPA, the LPA as drafted must infringe specific provisions of the MCA 2005 or the LPA, EPA and PG (Amendment) Regulations 2009 (soon to be superseded) or the common law of agency.

Background
XZ, a significantly wealthy individual in his 70s, executed an LPA for property and affairs on 4 December 2013. He also on the same day executed an LPA for health and welfare – the terms of which were not before the court. He appointed three close friends and business associates to be his attorneys – two of them American and one Canadian. In respect of some decisions he directed them to act jointly and for others jointly and severally – jointly in relation to all decisions in connection with the sale or purchase of any real estate and the sale or purchase of any other asset with a value in excess of c$3 million. All other decisions the attorneys may act jointly and severally.

He set out in the LPA some restrictions and conditions which ran to several pages and also set out guidance for the attorneys to consider.

On 23 May 2014 XZ’s solicitors applied to the OPG to register the LPA and this was rejected on 14 August 2014 as the Public Guardian refused to register the LPA “because he considered that most of the conditions imposed a reasonable fetter on the attorneys power to act and were therefore, ineffective as part of an LPA” (paragraph 11).

The objection by the Public Guardian was threefold:

• the LPA as drafted provided for a time delay between the assessment of capacity and decision-making authority given to the attorneys;
  
• the identification of a” Protector” who will know the psychiatrists who will provide the opinion in respect of capacity and this protector was initially to be an American lawyer called SC whom XZ had known since college days. The Public Guardian objected to the protector as it was not someone with the expertise to assess the donor’s capacity nor overall an expert opinion, that the protector is not an attorney and yet the protector would be in a position to interfere with the attorneys’ duties to act in the best interests of XZ. The protector is not a party to the LPA and is not bound by the same duties as attorneys. The Public Guardian considered that the provision of the emergency clause for the attorneys would not help this difficulty as emergency related only to the preservation of assets would not cover all the best interest decisions;
  
• the psychiatric opinion –  the difficulty for the Public Guardian was that there would be two psychiatric opinions before taking any action which would render it likely to be unworkable and further issues as to severance with the protector and the delay between an assessment of capacity and decision-making authority.

Decision
The court considered the powers under section 23 of the MCA 2005 which in subsection 1 provides “the court may determine any question as to the meaning or effect of a lasting power of attorney or an instrument purporting to create one”. The court also considered paragraph 11 of schedule 1 to the Act which is headed “Instruments not made properly or containing ineffective provision”.

The court noted that this was not an application by the Public Guardian to sever the provisions which they consider to be ineffective but an application by XZ to determine the meaning and effect of his LPA under section 23 (1).

The court ordered the Public Guardian to register the LPA as drafted, finding that none of the specific provisions of the Mental Capacity Act 2005, or the LPA, EPA and PG regulations or the common law of agency had been infringed by the provisions of XZ’S LPA.

“The Public Guardian has no right to make a paternalistic judgment on his behalf and decide that it would be in his best interests for these provisions to be severed” (paragraph 38).

Therefore the court pursuant to section 23 (1) of the MCA declared that XZ’s LPA does not contain any provisions which:

• would be ineffective as part of an LPA; or
  
• would prevent the instrument from operating as a valid power of attorney.
  

Discussion 
The schedule attached to the judgment is a useful document for any lawyer drafting an LPA or indeed a layperson. It is very detailed but if one was to follow this template you need to note the following:
The new regulations, namely the LPA, EPA and PG (Amendment) Regulations 2015 (SI 2015 number 899) were laid before Parliament and they prescribed two new forms of LPA which will come into force on 1 July 2015.

There will be a new section 5 in the LPA for property affairs (but note not for health and welfare) which is headed “When can your attorneys make decisions?” The donor is required to tick one of two boxes:

A) as soon as my LPA has been registered (and also when I don’t have mental capacity)
B) only when I don’t have capacity.

However, beneath the words “only when I don’t have capacity” is a message which reads:

“Be careful – this can make your LPA a lot less useful. Your attorneys might be asked to prove you do not have mental capacity each time they try to use this LPA“.

The case of XZ is really a precursor to these changes as he only wants his attorneys to act when he lacks capacity. XZ acknowledges that his LPA will be less effective because of the provisions that he has drafted but he wishes them to remain as an integral part of the registered instrument for his own reassurance and peace of mind. While some people may think this is unwise it is though XZ’s will and preference and should be treated with respect.

Read the full text of the judgment on Bailii