Power and authority

In the recent decision in Application for Guardianship in respect of W 2014 SLT (Sh Ct) 83 (referred to as NW in this article), the sheriff at Glasgow held that a document purporting to be a power of attorney was of no valid effect.

He did so on the basis that the document had two fatal flaws, in that it did not conform to the requirements of (first) s 15(3)(b), and (secondly) s 15(3)(ba) of the Adults with Incapacity (Scotland) Act 2000. The decision has highlighted important issues (and consequences) for practitioners drafting power of attorney documents.

This article offers an alternative view as to the requirements of s 15.

General

We all enjoy the presumption of freedom to contract, and I suggest that when analysing what a power of attorney achieves and how it is created, it is worth starting the analysis from that point. The granter is gratuitously conferring powers on another. A grant may be limited, but similarly, it may not. The 2000 Act does not, of course, stipulate when a document will be effective: that is a matter which is primarily up to the granter and, to a lesser extent, the attorney inasmuch as they require to consent to the appointment.

Section 15(3)(ba)

However, s 15(3)(ba) allows a distinction in the operation of powers as between (first) a power of attorney that is exercisable at large (i.e. following subscription and registration), and (secondly) a power of attorney exercisable “only if the granter is determined to be incapable”. The latter scenario has been referred to as a “springing power”: see “Effective continuing powers of attorney” 2002 SLT (News) 215. Section 15(3)(ba) creates what might be called an additional spring to that springing power.

This article has been written without the benefit of having seen the document in NW. However, paras 16-18 of the decision record certain aspects of the terms of the purported power of attorney document. From these it appears that there was no explicit mention as to whether the power of attorney was one which was intended to come within the terms of s 15(3)(ba), i.e. exercisable only on incapacity. The report infers that the power of attorney was silent on this issue, as para 18 records: “There is no further reference, anywhere in the document, to the issue of subsequent incapacity”. Instead, at para 32 it is recorded that the attorney (a bank) accepted that it was never intended that they operate the powers while the adult had capacity (although it is not clear whether that concession was made as regards the bank’s or the adult’s intention).

In my view, the foregoing comments are the crux of the issue: where a power of attorney is silent as to “springing powers”, I suggest that it cannot be a power which is limited – i.e. to apply only in the event of incapacity. In this regard it might be helpful to reflect on the nature of a power of attorney: it is a mandate of powers which becomes effective when accepted (in the present case by registration with the OPG). This is consistent with the rationale of Danby v Coutts & Co (1885) 29 Ch D 500. There the court considered the effect of a recital which bore to limit the powers during the grantor’s absence on holiday. Kay J observed at 515: “It is only a conclusion of law, that if such a power is silent as to its duration it must last during the donor’s life, or until he revokes it”.

I suggest this rationale should apply to any type of limitation. In other words, if the power of attorney is to be limited in some way, that requires to be expressly stated.

The foregoing rationale is consistent with s 15(1), which states that where a power of attorney is granted, it shall “notwithstanding any rule of law, continue [my emphasis] to have effect”. That subsection is, of course, qualified by the following provisions of s 15(3) as to the validity of a document.

I suggest that where a power of attorney is granted without the limitation provided for in s 15(3)(ba) then, being a gratuitous grant of power, it should be effective (subject to meeting the statutory requirements). Therefore in the case of NW, the fact that the bank may not have acted under the powers conferred on it would not be relevant, if the power was not one which came within s 15(3)(ba). In my respectful view, the matter should be considered from the perspective of the granter; where the attorney had accepted the powers and effected registration with the OPG, the issue of s 15(3)(ba) would not, then, need to be considered. It follows that if I am correct in the foregoing analysis, one would not require to look behind the four corners of the deed to consider the granter or appointee’s intention as regards when they would act.

For the sake of completeness, I acknowledge that (not having seen the pleadings and productions) the document in NW might have been a power of attorney affected by a springing power, i.e. one which would only be exercisable in the event of the granter becoming incapable. If that were the case, then I respectfully agree with the sheriff’s analysis as to the second spring, i.e. how the determination of incapacity may be made.

Section 15(3)(b)

The case of Danby may also be relevant to analysing the first ground for the sheriff holding the power of attorney to be invalid: that the document did not contain a specific statement which clearly expressed the granter’s intention that the power be a continuing power. That requirement is prescribed by s 15(3)(b).

Paragraph 16 of the judgment records part of the appointment clause: “I... appoint... to be my continuing Attorney (‘my attorney’)”.

It must be a benchmark of good practice to include wording as suggested by the sheriff at para 25. However, the decision – that the absence of such wording (or indeed any clause, other than the appointment clause) invalidates the document – does not sit well with the dicta approved by Danby, following Payler v Homersham 4 M & S 423, that “the general words of a release may be restrained by the particular recital. Common law requires that it should be so, and in order to construe any instrument truly you must have regard to all its parts, and most especially to the particular words of it” (Danby at 514).

Danby, of course, was concerned with the potential limits of a power of attorney, and I acknowledge that the foregoing quote talks about restraining a power. Nevertheless, I support a more purposive approach to the construction of s 15 (as regards its practical application), akin to Lord Diplock’s comments in Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201: “if a detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense”. Applying this dictum to the appointment clause of the document in NW, I would argue that the granter had given a clear direction as to their intention, as particularly required by s 15(3)(b).

Next steps?

As a result of the decision, the OPG and Law Society of Scotland have each issued guidance to the profession about registration of powers of attorney (see Journal, June 2014, 42). At the time of drafting this article, it is understood that an appeal against the decision is no longer being pursued, but that the OPG is in the course of applying for directions from the sheriff at Glasgow on power of attorney issues, as a result of the decision in NW. Presumably, such application will proceed in the court process relating to the adult.

Given the level of interest in this case and the potential ramifications of the decision at first instance, further announcements are expected as to how s 15 of the 2000 Act should apply in practice. Irrespective of such subsequent directions as may be pronounced, the NW decision highlights very useful guidance that the profession will, no doubt, wish to heed as this interesting area of law continues to evolve.