I am delighted to be hosting an article (my first) penned by my colleague Alison Lamont on the recent judgment, OPG v JM. Usually I skim read judgments relating to finances, but given this was another thorough analysis provided by Senior Judge Lush on the downfall of another attorney, it was a must read. Alison felt the same and as I often do with welfare judgments, felt compelled to draft a blog for our Clark Willmott / Elderly Care and Court of Protection websites. This is the longer version, for those who wanted a little more information, without having to read the judgment itself.
Over to you Alison…
Public Guardian v JM (Case No 12351387 heard on 4 February 2014):
Guidance issued by the Court of Protection’s President on 16 January 2014 requires judges (where permission is sought) to allow judgments to be published in “any case where the issues include whether a person should be restrained from acting as an attorney or a deputy or that an appointment should be revoked or his or her powers should be reduced.”
Senior Judge Lush’s judgment in the matter of Public Guardian v JM (Case No: 12351387 hearing on 4 February 2014) has now been published: http://www.bailii.org/ew/cases/EWHC/COP/2014/B4.html.
- DP is around 89 years old and is/was a member of the Orthodox Church. Her husband died in 1997 and was buried in Brookwood Cemetery. Her closest relatives are two elderly cousins and several first cousins once removed.
- In August 2011 DP made a will appointing JM and her accountant to be her executors. The will left 10% of the net proceeds of sale of her house to Brookwood Cemetery and 10% to the Russian Orthodox Church. The remaining 80% of the net proceeds of sale of the house and her entire residuary estate were to go to her former gardener JM. DP had known JM for about seven years. .
- In October 2011, DP made an LPA for property and financial affairs, appointing JM as sole attorney without appointing a replacement attorney or imposing any special restrictions or conditions.
- In January 2012 a social worker contacted the Office of the Public Guardian (‘OPG’) following safeguarding concerns but as the matter related to welfare rather than financial matters, the OPG did not feel able to take any action. The NHS Trust placed DP under a safeguarding alert.
- The LPA was registered on 20 February 2012.
- DP moved to live in a residential care home in London in April 2012.
- JM arranged a banker’s draft for £1,500 on 7 June 2012 from DP’s account and appears to have made a number of cash withdrawals from March 2012 to March 2013 totalling £8,520.
- In July 2012, JM paid a deposit of £599 from DP’s funds to lease a Motability vehicle for his wife. He then withdrew £55 a week from DP’s funds to hire this vehicle even though his wife was in receipt of the mobility element of DLA. JM argued that the vehicle had been acquired for DP’s benefit and also tried to justify paying for petrol from DP’s funds (£20 – £30 per week).
- In August 2012, the Financial Ombudsman awarded DP compensation of £38,606.32 following negligent investment recommended by a financial adviser. In November 2012 JM made a gift to himself from DP’s funds for around the same sum (£38,000).
- In February 2013, JM sold DP’s house for £165,000 and placed the net proceeds of sale in a high interest account at Barclays Bank in his own name. There is nothing in the judgment to suggest that Barclays raised any concerns about this. JM subsequently asked for the account to be registered in DP’s name but only after he became aware of the OPG’s investigations.
- JM had paid himself a salary of £20 a day for 365 days’ house clearance and rubbish removal. He also awarded himself a salary of £1,040 for twelve months’ gardening at a rate of £20 a week.
- DP’s assets after the attorney’s unauthorised withdrawals and payments were in the region of £281,000.
- In March 2013 a Court Visitor concluded that DP did not have mental capacity in relation to a decision about revoking or suspending the LPA.
The Public Guardian applied to the Court of Protection (‘CoP’) requesting the Court to revoke and direct the cancellation of the registration of a Lasting Power of Attorney (‘LPA’) and to appoint a Panel Deputy instead. Judge Lush was satisfied that the attorney had both contravened his authority as an attorney and had not acted in DP’s best interests. He revoked the LPA and directed the Public Guardian to cancel its registration. He also directed that a member of the panel of deputies be invited to make an application to be appointed as deputy for DP. This judgment is of interest for a number of reasons:
1 The OPG’s investigation began after they were tipped off by a senior risk consultant at Aviva UK Life Financial Crime Team. The attorney (JM) had requested Aviva to transfer the donor (DP)’s bond of over £130,000 into an account in the attorney’s own name, saying that it was a gift from DP. Aviva refused to do so. He also asked for the bond money to be transferred into a bank account in DP’s name. Again Aviva refused to act on the attorney’s instructions and froze the bond. Now that these cases are being published with greater frequency, perhaps more banks and institutions will tackle problems with attorneyships and deputyships in this way.
2 In this case, the attorney had carefully ensured that care home fees were paid up to date and spending money was provided to DP. The care home may have been oblivious to what the attorney was doing. He had “gifted” himself £38,000, paid himself a salary without authority and made substantial cash withdrawals without keeping accounts.
3 Judge Lush confirmed that Section 12 of the Mental Capacity Act 2005 (‘the Act’)sets out the limited circumstances in which an attorney may make gifts to persons, related to or connected with the donor, including the attorney himself. In order to have made a gift of this magnitude (£38,000), he should have applied to the Court of Protection for formal authorisation under section 23(4) of the Act. Judge Lush has already provided useful guidance on gifting in the recent cases of Re GM and Re Joan Treadwell deceased.
4 The judge referred to the ‘inherent artificiality’ of the attorney’s claim for remuneration at a rate of £20 a day for 365 days’ house clearance and rubbish removal and £20 a week for 52 weeks’ gardening. JM had no authority to charge for his services under the LPA itself. If he wished to receive a salary, he should have applied to the Court for directions under section 23(3)(c) of the Act. Attorneys need to be aware that they cannot simply pay themselves what they want, particularly if there is no provision for this in the LPA itself. By failing to keep proper accounts and financial records, he was in breach of his fiduciary duties as an attorney.
5 JM’s witness statement of 17 November 2013 objected to the OPG investigating him about potential fraud and money laundering. He argued that DP had become part of his family; they would go on holidays and days out together. He said that Aviva had ‘misled’ the OPG by giving false information. He said that the police had concluded their investigation and had not taken things further so he did not understand why the OPG was still investigating. Judge Lush explained the different standards of proof involved in criminal and civil investigations. The police may not have felt there was enough evidence to pursue a criminal charge: to convict him of a financial crime would require evidence “beyond reasonable doubt.” However, the CoP’s role was to judge whether the LPA should be revoked on the “balance of probabilities”.
6 The judgment brushes upon the law regarding ademption caused by an attorney; this is where gifts in a will fail because the subject matter of the gift no longer exists, perhaps because the attorney has disposed of it either deliberately or unwittingly. Judge Lush referred to this area of the law as “a minefield”. In this case, the issue was that the house named in the will had been sold by DP’s attorney so it would not form part of DP’s estate on death. Judge Lush commented in an addendum to this judgment that because Aviva froze the investment bond, it was entirely appropriate for JM to sell DP’s house to make funds available to pay her care home fees. The ademption of the gifts in the will to Brookwood Cemetery and the Russian Orthodox Church was “unavoidable and there was no intentional interference on JM’s part with the succession rights under DP’s will, even though he was aware of the contents of the will and stood to gain substantially from the ademption as the residuary beneficiary.”
7 The judge revoked the LPA and said a panel deputy should be appointed. He commented further that a statutory will application should be considered by the new Deputy to resolve this issue and give effect to DP’s wish that Brookwood Cemetery and the Russian Orthodox Church should receive some kind of financial benefit.
8 Senior Judge Lush also referred to the OPG’s Annual Report and Accounts 2012-2013, revealing some interesting statistics. Relatively few matters investigated by the OPG will culminate in an application to the CoP for the removal of an attorney or deputy. Last year a total of 2,982 safeguarding referrals were made to the OPG. 728 (only 24%) were referred for full investigation and the Public Guardian approved 480 investigation case recommendations. Following investigation, only 136 resulted in an application to the Court of Protection for the removal of an attorney or deputy.
This case serves as a further warning to attorneys that they cannot simply pay themselves or gift what they want, particularly if there is no provision for this in the LPA itself. By failing to keep proper accounts and financial records, JM was in breach of his fiduciary duties as an attorney. Panel deputyships often arise from these sorts of situations. For further information about panel deputies, please see this article drafted by Anthony Fairweather, the only panel deputy in Bristol.