Capacity to make lasting powers of attorney

The test and issues in practice

Alexander Drapkin

The test for capacity to make a lasting power of attorney (LPA) has been the subject of previous discussion in these pages. However, for several reasons it may be helpful to consider it again: in the intervening years, there has been a further case on the topic; of all the tests for capacity, after that to make a will, it probably leads to the most disputes; the law is significantly less developed and more unsettled than it is on most capacity tests and certainly that to make a will; and finally, it is one that practitioners have a good opportunity to ensure clients meet.

LPAs are often created by legal professionals, who are commonly asked to act as certificate providers. This provides an opportunity to address the problems head-on. In most cases these are relatively simple. However, if clients have complex or very high value property and affairs or complex and difficult family relationships, then the issues may be more involved.

Re Collis

It is well known that the test for capacity to make an LPA is set out in the unreported case of Re Collis, a decision of the highly experienced then Senior Judge of the Court of Protection, Denzil Lush. In that case HHJ Lush laid out a test for capacity to make an LPA that drew on the old law on enduring powers of attorney (EPAs), but with an updated approach given the distinctions between the instruments.

The essential test is that set out in sections 2 and 3 of the Mental Capacity Act (MCA) 2005. Under section 2 a person lacks capacity in relation to a particular decision if they are unable to make that decision for themselves under section 3. Under section 3 they will be unable to make a decision for themselves if they cannot understand, retain, use or weigh the information relevant to a decision, or cannot communicate their decision.

The question that arises is what the relevant information for the purposes of the test is. In Re Collis, HHJ Lush concluded that it was as follows:

• The lasting power cannot be used until it has been registered with the Public Guardian.

• The attorney will be able to assume complete authority over the donor's property and affairs or health and wellbeing as appropriate.

• The attorney will be able to do anything the donor could have done.

• The authority in the power includes authority to make decisions on the donor's behalf in circumstances where he no longer has capacity and in the case of a property and affairs power, unless there is a restriction placed on the power, the donee has authority to use the power when the donor has capacity.

• Where expressly provided in a welfare power, authority to give or refuse consent to the carrying out or continuation of life-sustaining treatment, which would be determined by the healthcare professional as necessary to sustain life. As such the authority would depend on the circumstances and not the treatment.

• The donor can revoke the power at any time provided he has mental capacity irrespective whether or not it is registered with the Public Guardian.

However, it is clear that, at least in the abstract, the test must go somewhat beyond this formulation. It is suggested that the information must also include some concept of the way in which attorneys must make decisions, that they must be made in the donor's best interests and in compliance with the Act. Further, and more interestingly, section 3(4) of the MCA 2005 says that:

"(4) The information relevant to a decision includes information about the reasonably foreseeable consequences of-

(a) deciding one way or another, or

(b) failing to make the decision."

If we apply that section to the issue, the information must include the reasonably foreseeable consequences of making or not making the power and of making it in different terms or appointing different attorneys.

That leaves matters a little unclear. Just how far do these reasonably foreseeable consequences go? A further case on the issue has suggested that they can go quite far.

The Public Guardian v RI [2022] EWCOP 22 (Re RD) concerned RD, a man whose LPA was being called into question on the grounds that he had lacked capacity to make it. The matter was unusual for a property and affairs matter in being considered by a Tier 3 (High Court level) judge of the Court of Protection, Mr Justice Poole. This lends the decision a certain weight, particularly in the context of the paucity of authority on the topic.

Unfortunately, the case really turned on the low quality of the medical evidence available to the court rather than the law. However, Mr Justice Poole did set out the factors that he considered to be relevant information:

• The effect of the LPA;

• Who the attorneys were;

• The scope of the attorneys' powers and that the MCA 2005 restricted the exercise of their powers;

• When the attorneys could exercise those powers, including the need for the LPA to be executed before it was effective;

• The scope of the assets the attorneys could deal with under the LPA;

• The power of the donor to revoke the LPA when he had capacity to do so; and

• The pros and cons of executing the particular LPA and of not doing so.

Of these, two are of interest: the scope of the assets that the attorneys could deal with under the LPA; and the pros and cons of executing the particular LPA and of not doing so. In relation to the former, it is interesting that the judge commented that one of the matters that RD would have had to understand as part of the scope of his assets was an interest he was expected to have under a trust under his mother's will. The LPA was, however, made at a time when his mother was not yet dead. This is a highly remote interest and would make for a high bar to having capacity on this aspect of the test. That said, it is congruent with the accepted position for capacity to manage your property and affairs, which is that you have to have capacity to manage the property and affairs that you have. As a result, if they are complex, the test will be more difficult to meet.

The pros and cons of executing the particular LPA or of not doing so is in many ways more interesting. It is a shame that the RD case did not itself provide more of an opportunity to explore the law on it. It really leaves an open question as to what P must be capable of considering in order to make an LPA for property and affairs.

There is plenty of authority that we should not set the bar too high. Most of this comes from a welfare context where the decisions in question are more essential: where to live; what treatment to have; whether to engage in sexual relations or not. As CC v KK and STCC [2012] COPLR 637 says, "... it is not necessary for a person to demonstrate a capacity to understand and weigh up every detail of the respective options, but merely the salient factors". Another case, Heart of England NHS Foundation Trust v JB [2014] EWCOP 342, talks of a "broad general understanding" being necessary. How then, is this to be approached the property and affairs context?

It is helpful to consider a particular scenario. The characters from TV series "Succession" make for a useful one. They have substantial property and they hate each other. If we start with the patriarch, Logan, and his property and affairs, that provides a good way into the LPA issues.

Logan's capacity to manage his property and affairs

Logan is a multi-billionaire, who owns an international media company called Waystar Royco. Logan takes it into his head to sell the group. Logan may well have professional advisers queuing up to inform him that that is a good thing to do. He appears to be able to understand all the financial aspects of the deal. He professes to believe that the market is moving in a particular way that provides a financial incentive to sell.

However, he has raised his children their whole life to believe that they will inherit the business and they are clear that they will never speak to him again if he sells it. The children are adamant that if Logan had capacity he would never consider selling. Logan does not really seem willing or able (and it is extremely difficult to tell which) to consider the effect of that.

If he walked into a legal professional's office, it's unlikely they would be overly concerned by that. Logan appears to be on it, punchy, decisive. But should they be? The questions are:

1. In Logan's personal circumstances, is the destruction of the family relationships a reasonably foreseeable consequence of the sale of the family business?

2. Is Logan capable of considering such consequences?

Question 2 is ostensibly answerable but it is extremely hard to assess if Logan won't engage. That's a practical problem for his advisers. However, question 1 is a legal matter. There is currently no good answer. Clearly if Logan had capacity he would notice that he was going to destroy his relationship with his children. He would probably take that into account. However, whether the court is going to insist that he is able to consider that in order for him to be capacitous is a straight-up policy decision about the limits of reasonable foreseeability.

In a clear-cut case the court might be willing to include it as a necessary factor. The reason that courts cut down the relevant information is to avoid limiting autonomy. However, the impetus to do this is much greater in the more essential welfare decisions, which courts are extremely keen for people to be able to make themselves, than in questions of property and financial affairs.

Logan's LPA

Making an LPA is usually thought of as a decision requiring quite a low level of capacity. Certainly, it is often stated that the test requires a lower level than that required to manage your property and affairs. However, in this context the issues are far from clear. If we assume that Logan could give an LPA for property and affairs to any of the following:

• His daughter, Shiv, who is good at business but inexperienced;

• His son, Kendal, who is a drug addict and unstable;

• His trusted adviser, Frank, who is a safe pair of hands but has his own motivations; or

• His nephew, Greg, who is untested and might also have an interest in Logan's brother's share of Waystar Royco.

It is clear that Logan does have to be capable of considering the factors listed above in relation to the potential donees. The general nature of the person that he is appointing is relevant information.

However, the extent to which he has to consider the foreseeable consequences is less obvious. As will be clear to fans of the TV show, but can in any event be shortly stated, whoever is chosen as attorney is going to behave in a particular way:

• Shiv is going to do what she wants and squeeze out Kendal;

• Kendal is going to do the same to Shiv;

• Frank is probably the best bet for holding the family together in the business; and

• Cousin Greg's interest in Logan's brother's shares might give him more control than Logan intended and gives him a personal interest.

The question of to what extent Logan is able to retain, use and weigh those matters is extremely difficult and has no certain answer. It is likely that the answer is going to be highly policy inflected. Possibly in a case where these issues were very stark, a court might find that some understanding of what the potential attorneys might do was relevant information.

However, there is a policy problem in that because the court is unlikely to want to make it much harder for people to make LPAs. If it became too hard, it would really upset the current general approach, that making an LPA requires a similar (but lower) level of capacity as that necessary to manage the relevant property and affairs. Many deputyship disputes are cut through by the court on the basis that, while P lacks capacity to manage their property and affairs, they retain capacity to make an LPA and so they can make one and their autonomy can be respected to the maximum extent because the test is low. However, a complex case will really test this approach. It is a shame that the issues were not fully explored in Re RD.

As practitioners, all one can currently do is be aware of the potential complexities. Where there is any indication that the donor of an LPA has either a family rift or very complex property and affairs, it will be sensible when taking instructions for an LPA to explore (and document) the client's understanding of the qualities of the potential donees, the ways in which they might behave and the likely response of others to the decisions they might make. At the very least, if disputes do arise later on, the professional will be able to show that the issues were fully explored. In addition, such material may provide valuable evidence of P's wishes and feelings to guide his attorneys or the court at a later date.