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Powers of attorney: the Inner House decides

16 February 15

The significance of the Inner House decision that affirmed the validity of the common form of continuing power of attorney appointment, and the use of the special case procedure to secure it

by Adrian Ward

"I appreciate that there was some anxiety about the validity of the standard form of power of attorney. It is helpful that we now have a clear and authoritative position which supports the validity of the standard style.”

Many may regard as something of an understatement this response from Sandra McDonald, Public Guardian, to the outcome of the Special Case between Great Stuart Trustees Ltd and the Public Guardian [2014] CSIH 114. It could equally be said that she and the Scottish legal system are to be commended for moving promptly to obtain an authoritative judgment which effectively resolves huge concerns as to whether some 282,000 powers of attorney, registered as being continuing powers of attorney in terms of the Adults with Incapacity (Scotland) Act 2000, were in fact valid.

The document before the court appointed the trustee company “to be my continuing attorney in terms of section 15 of the Adults with Incapacity (Scotland) Act 2000”. That, in context, was held by the Inner House to be sufficient for the document to comply with s 15(3)(b) of the Act, which requires, for compliance, a document which inter alia “incorporates a statement which clearly expresses the granter’s intention that the power be a continuing power”.

In addition, the Inner House helpfully expressed an opinion (obiter) on the proper application of the requirement in s 15(3)(ba) that “where the continuing power of attorney is exercisable only if the granter is determined to be incapable in relation to decisions about the matter to which the power relates, [it] states that the granter has considered how such a determination may be made”.

The decision is significant on the general question of when a special case is competent, and the application of those principles to the case before the court. Procedural aspects are also worthy of comment. However, although the court obviously had to deal with competency before the merits, this article comments on competency and procedure later. It is appropriate first to summarise briefly the history of decisions giving rise to this case, and the terms and circumstances of the particular document before the court.

Seismic effect

The context for this litigation is one in which public perceptions of the concept of a power of attorney being operable during incapacity of the granter have shifted from something suspiciously novel to the main reason for granting the great majority of such documents. This shift has been international. Among many examples, Belgium introduced the concept last year; the Netherlands is doing so currently, drawing upon Scottish experience – also sought by the Nordic states, and by the Council of Europe in recommending the adoption of “continuing powers of attorney” (using that term to include welfare powers), in Ministerial Recommendation (2009) 11.

On 29 April 2014, an opposed hearing took place before Sheriff Baird in Glasgow Sheriff Court. An application for guardianship by relatives of W was opposed by a bank that held a power of attorney which had been registered as a continuing power of attorney. The operative clause was substantially the same as in the document before the Inner House, quoted above. Sheriff Baird held (Application for guardianship in respect of W 2014 SLT (Sh Ct) 83) that this was insufficient to comply with s 15(3)(b). He also held that the document failed to comply with s 15(3)(ba).

The shockwaves spread rapidly. Not only did the document in relevant respects comply with the bank’s standard style; it substantially complied with the “sample” style of power of attorney published on the Public Guardian’s website, and very widely adopted. Moreover, Sheriff Baird’s “inexorable logic”, as he put it, potentially invalidated many welfare (and combined) powers of attorney, by reference to the corresponding requirements of s 16(3)(b) and (ba).

A few months later, in a case decided at Forfar Sheriff Court, Sheriff Murray reached the opposite conclusion on yet another substantially similar document. In the context of a dispute among joint attorneys, Sheriff Murray held (B v H 2014 SLT (Sh Ct) 160) that the document before him was a valid continuing power of attorney in terms of the Act. In terms of s 14 of the Act, the route of appeal is to the sheriff principal and thence, with leave, to the Court of Session. In W, an appeal was marked but withdrawn. There was no appeal against the decision of Sheriff Murray. Those cases and the issues raised by them were discussed in the Journal (MacLeod, September 2014, 26; Ward, October 2014, 20).

Expressions of intention

It was against this background that concerns arose regarding a power of attorney granted on 8 July 2004 by JS in favour of his wife, whom failing the trustee company. The granter’s wife had died and the trustee company had been acting as continuing attorney. It was anticipated that the attorney would shortly require to sell the granter’s house. The granter was advised by senior counsel that W cast doubt upon whether the attorney could competently sell the house and grant good title to it. It was in these circumstances that the attorney as first party and the Public Guardian as second party brought the special case before the Court of Session.

The judgment in the special case narrates the relevant statutory provisions and notes that s 15(3)(ba) was inserted and took effect after the granting by JS of his power of attorney. It narrates the background to s 15, quoting in particular from the Scottish Law Commission’s Report on Incapable Adults (No 151, July 1995), noting that the main advantage of contractually conferred powers of attorney is that they are relatively cheap and flexible compared with court-appointed guardians; that at common law the appointment of an attorney lapsed in the event of the subsequent mental incapacity of the granter (though the present writer has always questioned that assertion in relation to documents specifically asserting that they should continue beyond incapacity); that s 71(1) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 created a presumption in favour of continuation unless the granter opted out; and that this was reversed by the Act, which created a requirement to opt in, and thus the need for s 15(3)(b).

The Commission rejected the use of a prescribed style of document, as that could create difficulties if there were any deviation, or in unusual cases. Thus: “The only requirement should be that the document clearly shows that the granter intended the attorney to have continuing power.”

The Inner House held that s 15 must be construed purposively. The policy clearly was that the creation of a continuing power should not be a matter of implication but should be done expressly, but the use of a prescribed style was rejected. That indicated that no particular significance should be attached to the precise wording used, as long as the intention was sufficiently clear. Section 15(3)(b) was concerned solely with the expression of the granter’s intention, and should be construed accordingly.

On that basis, the court held that the document granted by JS “is unquestionably a valid continuing power of attorney for the purposes of s 15”. The terms of the operative clause, as quoted above, sufficed for that. “Continuing attorney” is defined in s 15(2) as a person on whom a continuing power of attorney is conferred. There is express reference to s 15, and: “It is difficult to imagine what function that reference would have served if there had been no intention to create a continuing power of attorney within the meaning of that section.” While those factors were sufficient to “clearly express the granter’s intention”, further provisions of the document identified in the judgment reinforced that conclusion. These included a concluding reference to “this continuing power of attorney” and the incorporation of a certificate in terms of s 15(3)(c). As to the two sheriff court cases, the court preferred the reasoning of Sheriff Murray.

Helpfully, the court also addressed the issues concerning s 15(3)(ba), albeit on an obiter basis. That paragraph is concerned only with “springing” powers of attorney. The power of attorney granted by JS was immediately exercisable. The court considered that the same would apply to the document before the sheriff in W, notwithstanding that the bank in that case had accepted an argument that it was never intended that the bank should act as attorney while the granter retained capacity: the wording of the document appeared to be to the contrary.

Valedictory

One trusts that the fact that the reasoning of Sheriff John Baird in W has thus been rejected by the Inner House will not in any way detract from appreciation of his huge personal contribution to the development of adult incapacity law in Scotland, as he approaches his retirement. With leave to take, it is understood that his last day in court will be 24 March 2015.

It would take an article longer than this to describe that contribution. Even a short summary must include several elements. As the lead sheriff in Glasgow dealing with adult incapacity matters, he has developed (among much else right across the jurisdiction) the scope of matters which may be addressed under part 6 of the Act; the principles and procedures applicable when competition for appointments, including joint appointments, is before the court; the interrelationship between the Act and related jurisdictions, including criminal and mental health; issues of compatibility with the European Convention on Human Rights; and almost always the carefully balanced and rigorous application of the Act’s s 1 principles to achieve appropriate solutions. He has contributed substantially and uniquely towards the development of practices in his own court and elsewhere to achieve the prompt and efficient disposal of cases, in particular the maximum use of “front loading” to minimise the number of cases requiring continuation of hearings.

So far as compatible with proper respect for the court, he has created a user-friendly atmosphere in which countless anxious and stressed applicants have felt themselves to be in an understanding and supportive environment. So far as can properly be done from the bench, he has encouraged and assisted many young solicitors in their development of an interest and competence in this area of law. In terms of the initial years of development of the Incapacity Act jurisdiction, his contribution has been unique and immense.

Adrian D Ward, partner, TC Young, Glasgow
e: adw@tcyoung.co.uk

Preliminary questions

On competency (Adrian Ward writes), the court noted that both parties to the special case agreed that the document before the court was a valid continuing power of attorney in terms of s 15. In general, special case procedure, now provided for in s 27 of the Court of Session Act 1988, is not available to decide questions that are not in dispute.

The court reviewed relevant authorities, namely Mackinnon’s Trs v MacNeill (1897) 24 R 981, Mitchell Innes’ Trs v Mitchell Innes 1912 SC 228, and Turner’s Trs v Turner 1943 SC 389. From Turner’s Trs the court derived the following two principles: “first, if another form of action would be competent, a special case will normally be competent; and secondly, the underlying principle is that the court will decide questions that are practical, not questions that are hypothetical or academic”.

In Innes the question was whether trustees had power to sell certain heritable subjects, and although there was no real contention between the parties, the special case was competent because the person with the greatest interest to challenge the decision of the trustees would be a prospective purchaser. In Turner’s Trs, the disposal of the deceased’s estate was a practical issue for the trustees.

In the case of the power of attorney by JS, the court noted that the questions raised were certainly not hypothetical or academic, given the imminent need to sell the house. In consequence, other forms of action, such as an action for declarator, would be competent, even if the merits of the case were conceded by the defenders in the special case. Declarator would not bind third parties, but “it is obvious that others who practise or carry on business in the area in question are likely to follow the court’s decision”. A special case was no different.

However, aspects of the decision appear to be novel. In careful language, the court commented that “although it is not technically relevant to the competency of the special case, we note that the fundamental issues raised in this special case are of great general importance”. The court appointed an amicus curiae so that “while our decision cannot bind third parties, it has been reached following proper argument, and is therefore likely to command greater authority than a decision reached without a contradictor”. And the court offered its obiter opinion, similarly argued, on a point of “great general importance” not relevant to the special case at all, namely the issues concerning s 15(3)(ba).

Finally, in procedural and organisational terms, it is notable that the special case was lodged on 2 December 2014, and heard and decided on 10 December 2014. Within that short space of time, not only was an Extra Division convened and the hearing arranged, but formidable representation was assembled in the form of James McNeill QC for the attorney, James Wolffe QC (Dean of Faculty) for the Public Guardian, and Kenneth McBrearty QC as amicus curiae

 

 

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David Bjornson

Friday August 5, 2016, 21:32

The policy clearly was that the creation of a continuing power should not be a matter of implication but should be done expressly!