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What can the Court do when Deputies “turn bad”?

Posted by Jess Flanagan who specialises in applications to the Court of Protection including deputyships.

The appointment of a deputy for property and affairs should ensure that the person who lacks mental capacity (“P”)’s financial position is adequately protected and, in the vast majority of cases, this is likely to be the case. However, two recent cases in the Court of Protection illustrate what happens when financial deputies abuse their position of trust and do not act in P’s best interests. These cases reveal why the supervisory function of the Office of the Public Guardian (‘OPG’) and the deputyship security bond are such important safeguards for P.

What is the security bond?

Before the Court of Protection releases a deputyship order, it requires the deputy to put in place a security bond. The level of the bond is set by the Court and will depend on the extent of P’s net assets, income and outgoings and the level of experience of the deputy. An annual premium is usually payable from P’s funds to cover this important insurance against the deputy ‘turning bad’ (unless P’s assets are limited, in which case a one off premium will be required).

Re GM [2013]

Anthony Fairweather has previously discussed the recent Court of Protection judgment in Re GM [2013] where Senior Judge Lush set out the parameters of “reasonable” gifting by Deputies. As Anthony points out, this case clarifies that the authority of deputies and attorneys to make gifts is limited without the court’s consent. Re GM is a clear example of financial abuse by joint deputies that did not go unnoticed by the Office of the Public Guardian (OPG). One of the main jobs of the OPG is to supervise deputies appointed by the Court of Protection and it is reassuring to know that the OPG will pick up on such cases of excessive expenditure and refer the matter to the Court of Protection.

Order to repay the overspend

In Re GM, the judge found that the deputies were personally liable to G’s estate and were ordered to repay £205,000. The joint deputyship appointments were revoked. The judge ordered that somebody ‘with experience of unjust enrichment and restitution’ be appointed in their place. In other words, a professional deputy should be appointed who could take the necessary legal action against the former deputies to enforce the court’s order for repayment.

Calling in the security bond

In Re GM, the security bond, set at £275,000, covered the unauthorised gifts made by the deputies and was called in. Therefore, even if the deputies were bankrupt and could not repay the funds, encashing the security bond would ensure that P would not be out of pocket.   A further similar case has recently been heard by Senior Judge Lush and again the security bond was called in to the extent of the unauthorised expenditure.

Re Joan Treadwell deceased [2013]

The Public Guardian applied to Court to enforce a security bond in respect of unauthorised gifts made by the late Joan Treadwell’s deputy for property and affairs (her son Colin Lutz). Although the Court of Protection’s jurisdiction ends in most respects when P dies, it is still able to determine issues relating to the security bond, which remains in place for several years after P’s death unless formally discharged by the Court. The deputy had applied for a statutory will to be made on behalf of J, but was not happy with the compromise that had been executed and sought to reduce the inheritance of the ultimate beneficiaries of the residuary estate (his step-sisters) by dissipating J’s funds during her lifetime. Judge Lush summarised the deputy’s misdemeanours as follows: “having disposed of her entire income, he made inroads into her capital.” The loss to J’s estate was calculated to be £44,375 and an order was made to enforce the security in that sum.

A flawed system compared to LPAs?

After Re GM, several commentators said the deputyship system is flawed and this situation would not have happened if GM had made a Lasting Power of Attorney. Judge Lush pointed out that in fact, if GM’s nieces had been her attorneys rather than deputies, the Public Guardian would have had no duty to supervise them and there would have been much greater scope for their misconduct to be undiscovered. Ultimately in cases where the deputy has squandered P’s money, the deputyship should be discharged by the Court and a professional deputyship may be required. It will be for the new deputy to take action against the former deputy for repayment but in the meantime, the Court can order the security bond to be encashed to ensure that P is reimbursed. It is important that family members, friends and care providers know that if they are concerned about the actions (or inactions) of a deputy, they can ask the OPG to investigate. We can advise on when this may be appropriate. Equally, if you are a deputy or attorney and need advice on what gifting may be “reasonable” and whether an application to Court for authority may be required, we can assist.