– a highly unsuitable investment and she broke almost every rule in the book in making it”
This is the case of the reptile breeding investments, if ever you needed something to remember it by, and was recently decided in the Court of Protection (Number 12228697) Click here for the full court transcript It concerns a lady who had made a Lasting Power of Attorney in her later years, appointing her niece C (her only living relative) to be her attorney. Miss Buckley had moved to a private nursing home, and was, at the time of the case, 81 years old and of fragile mental health.
The Office of the Public Guardian received a complaint about the way C was handling Miss Buckley’s finances, and it started an investigation. A Court Visitor went to see Miss Buckley. She made detailed impartial observations about the way Miss Buckley talked about C, and her account of matters that had occurred during her residence at the nursing home was corroborated. Although communication was difficult, there appeared to be a recognisable element of lucidity and it was apparently that Miss Buckley viewed her relationship with C as being one where C was only after her money, and where she didn’t trust her.
The Office of the Public Guardian applied to the Court for an order that the LPA be suspended, her accounts frozen, full accounts to be made up and for C to be prohibited from encashing any asset owned by Miss Buckley.
The OPG’s investigator summarised the facts as follows:
- Miss Buckley’s house had been sold for £279,000 in April 2011
- Between January 2011 and June 2012 C had used £72,000 of Miss Buckley’s money to set up a reptile breeding business
- C admitted that she had used at least £7650 of Miss Buckley’s capital for her own personal benefit
- At one stage there had been daily maximum cash withdrawals of £300 a day from Miss Buckley’s Nationwide account.
- The Nationwide had alerted Social Services in April 2012 and the Police interviewed Miss C in July 2012
- Miss Buckley may have incurred a loss of about £150,000
The legal issue that has been clarified by this case, to the extent that it was not covered by the earlier case of Re Harcourt (31 July 2012) is the responsibility of an attorney when investing the donor’s funds.
There are two common misconceptions when it comes to investments. The first is that attorneys acting under an LPA can do whatever they like with the donor’s funds. And the second is that attorneys can do whatever the donors could – or would – have done personally, if they had the capacity to manage their property and financial affairs. Managing your own money is one thing.
Managing someone else’s money is an entirely different matter.
The Master went on to declare that whilst an individual can choose to act unwisely, or not at all, stashing their money under the mattress, this was not something that an attorney could do.
Under the Mental Capacity Act 2005 (MCA) s1(5) an act done, or decision made [by an attorney], must be done or made in [the donor’s]best interests.
Before the MCA came into force, there was a separate investment branch of the Court of Protection who carefully considered the suitability of investments for each patient. They divided up investments into short term types and long term types, and assessed the type of asset against the investment requirement and suggested a strategy appropriate for that investment.
When considering the suitability of investments, the person’s age and life expectancy are considered to be the most important criteria. A person of over 80 at the time the court would be asked for investment assessment would be considered to have a life expectancy of less than five years, unless there was clear medical evidence to the contrary. As such, a short term code would be selected, depending on the amounts at stake.
The Master went on to state that
“generally speaking , attorneys acting under an LPA should ensure that any investment products or services they acquire on a donor’s behalf are provided by individuals or firms who are regulated by the Financial Services Authority.”
This means that part of the value of the investment will be covered under the Financial Services Compensation Scheme.
I would suggest that, as they have fiduciary obligations that are similar to trustees, attorneys should comply with the provisions of the Trustee Act as regards the standard investment criteria and the requirement to obtain and consider proper advice. I would also recommend that attorneys and their financial advisers have regard to the criteria that were historically approved by the court and the antecedents of the OPG.
The master also reiterated the rule that investments should be made in the name of the donor, not that of the attorney, but that if it was not possible for the asset to be held in the name of the donor, that there must be a declaration of trust over the asset, documenting the true beneficial ownership. And that any loans of money to a member of the donor’s family should be (unless very small indeed) approved by the court, especially when it is in a case where there might be conflict between the attorney and the donor.
The Court therefore ordered that the LPA be revoked and cancelled, so that a deputy could be appointed. It was reported that the police had considered her conduct naïve but that no crime had been committed.
This case is one of the most important to come out of the Court of Protection in recent years as it clarifies many of the frequently asked questions and misconceptions. The Master went on to observe that the court’s authority should be sought in circumstances where it might appear as if the attorney’s own interests might conflict with those of the donor, in particular that:
- Attorneys should keep the donor’s money and property separate from their own or anyone else’s money
- Subject to a sensible de minimis exception, an application must be made to the court for an order under section 23 of the MCA 2005 in any of the following cases:
- Gifts that exceed the limited scope of the authority conferred on attorneys by section 12 MCA 2005
- Loans to the attorney or to members of the attorney’s family
- Any investment in the attorney’s own business
- Sales or purchases at an undervalue; and
- Any other transactions in which there is a conflict between the interests of the donor and the interests of the attorney