The Academies Financial Handbook is updated annually by the Department for Education and the Education and Skills Funding Agency; it contains a number of governance requirements for academy trusts.
The LPA document itself does not give much guidance. Page 11 contains a statement that includes acceptance by the attorney of the duty:
- to keep accounts and financial records; and
- to act in the Donor’s best interests.
The LPA gives no guidance about investment of the Donor’s funds.
The powers of a Deputy are set out in their deputyship order which will include the duty to keep accounts and act in P’s best interests. The Deputyship order will usually include a power of investment.
The Attorney and Deputy must also have regard to the principles of the Mental Capacity Act and Code of Practice. Neither document is issued to the Deputy or Attorney on taking office nor is any other help given.
Ignorance of these responsibilities however is no excuse as recent Court of Protection decisions have shown. The cases involved Attorneys but the issues are as relevant to Deputies.
In Re Buckley Senior Judge Lush was very critical of the Attorney who invested a significant part of the Donor’s assets in her own reptile business (which flopped!). The Attorney tried to argue it was what the Donor would have wanted as she liked animals and wanted to help the Attorney.
The Judge stressed, while an individual can make unwise decisions with their own money and need not keep accounts, an Attorney (and a Deputy) are under fiduciary obligations to act in a person’s best interests. He went on to refer to the duties of trustees when investing funds which include:
- Ensuring the suitability of the investments
- The need to diversify investments
- The requirement to review and vary the investments as appropriate; and
- Obtaining and considering “proper advice”.
In this context “proper advice” means the advice of a person who is reasonably believed by the trustee to be qualified to give it by virtue of their ability and experience. The Judge advised generally speaking, the advice should be given by a Financial Adviser or firm regulated by the Financial Conduct Authority.
These requirements are set out in the Trustee Act 2000. The Judge acknowledged they do not directly apply to a Deputy or Attorney but highlighted the common theme of the fiduciary responsibility. It will be a brave person who ignores the Judge’s words!
Prior to 2007 and the introduction of the LPA and Deputyship regime, there was specific investment guidance (Investing for Patients) used by the Court of Protection outlining how monies should be invested depending on the age, health and assets of the Donor. Sadly these were withdrawn and have not been replaced so there is no recognised guidance or yardstick against which to benchmark. The Judge therefore set out in his judgement his updated suggestion for these guidelines in certain circumstances – also hinting the OPG should produce updated guidance.
The judge also indicated the need for the Attorney to keep the Donor’s assets separate from their own. He also stressed, wherever possible, investments should be in the donor’s name failing which the Attorney (or Deputy) should execute a declaration of trust to confirm the true ownership.
Alluding to Investing for Patients the Judge pointed out the Attorney (and Deputy) must seek Court authority for:
- Gifts that exceed the statutory authority (in Re GM the same Judge expanded on what this might involve)
- Loans to the Attorney (or Deputy) and members of their family
- Any investment in the Attorney’s (or Deputy’s) business
- Sales or purchases at an undervalue; and
- Any other transaction where there is a conflict between the interests of the Attorney (or Deputy) and the Donor/P.
The Judge ordered that the Attorney be removed and advised:
“ignorance is no excuse…[an attorney] should at least be familiar with the “information you must read” on the LPA itself and the provisions of the Mental Capacity Act 2005 Code of Practice”.
You have been warned!!
This article was adapted for Nestor's Personal Injury Update (Winter Newsletter 2013) - click here to view.
For more information
Contact Alex Elphinston on firstname.lastname@example.org or 0121 212 7487.
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