Powers of attorney: full instructions?

As most readers will be aware, the recent decision of the Inner House in the Special Case between Great Stuart Trustees Ltd and the Public Guardian 2015 SLT 115, on what is necessary for a continuing power of attorney to comply with s 15(3)(b) of the Adults with Incapacity (Scotland) Act 2000, has clarified the position for the profession. As discussed by Adrian Ward at Journal, February 2015, 18, the Inner House held in that case that wording in the style that produced conflicting sheriff court decisions in W 2014 SLT (Sh Ct) 83 and B v H 2014 (Sh Ct) 160 was sufficient for it to comply with s 15(3)(b). However, the recent decisions do provide a timely reminder of the importance of careful drafting when it comes to powers of attorney.

The Inner House in Great Stuart Trustees held that s 15 of the Act must be construed purposively and, while it is clear that creation of a continuing power of attorney should be express, no specific wording is required in order to comply with s 15. Provided the intention of the granter is clear that the power of attorney is to be continuing in nature, that will suffice. However, the recent decisions provide a reminder to all who practise in this area of the statutory requirements, and of the importance of taking explicit instructions from our clients on whether they in fact wish to create a continuing power of attorney. We should not simply assume that is the case!

One of the criticisms Sheriff Baird had of the bank in the original W case was its argument that the continuing power of attorney was not intended to be exercised until such time as the granter had lost capacity. That was not reflected within the drafting of the deed itself, which did not include any statement to this effect, nor any statement in terms of s 15(3)(ba) of the Act that the granter had considered how his incapacity was to be determined. On the face of it, therefore, the continuing power of attorney was immediately exercisable upon registration.

Instructions essentials

Section 15(3)(ba) itself has been the subject of much debate among the profession for a number of years, with some taking the view that in order to comply with the section it is sufficient simply to include a statement within the power of attorney document that the granter has considered how his or her incapacity is to be determined. Others argue that the method of determination should be stated within the document itself. Clearly from a good drafting perspective, the method of determination should be included within the deed itself. This provides clarity to those relying on the document at a later date.

Practitioners must ensure that specific instructions are taken from the client at the outset on the following:

• the nature of the power of attorney (i.e. continuing or otherwise);
• when it is to come into effect;
• if it is intended that powers (or some powers) are to come into effect on the onset of incapacity, how does the granter wish his incapacity to be determined (i.e. attorney’s reasonable belief, doctor’s opinion etc);
• whether registration should be deferred, in accordance with the little-used s 19(3) or informally;
• in the case of joint attorneys, whether the granter wishes them always to act together, to allow majority decision-making or to allow any attorney to act alone, and how the risk of conflicting decisions is to be avoided if they may act alone (at the very least there should be a requirement for the other(s) to agree to delegation, either generally or for a particular purpose).

It may seem obvious, but detailed file notes of meetings and telephone instructions covering inter alia the above points (and follow-up letters to clients confirming instructions) can avoid issues arising at a later date, often once the granter has lost capacity. The issue of record keeping and file notes of meetings has also been brought into focus by the introduction of the Law Society of Scotland’s amended Practice Rules (Law Society of Scotland Practice Rules (Amendment No 2 Rules) 2014) and guidance, which came into force on 1 January 2015.

Capacity: a point for the solicitor

The amended rules centre on powers of attorney granted in favour of regulated persons (or companies, partnerships, LLPs, trusts or other entities in which the regulated person participates), and clarify that where a regulated person is appointed as attorney in a professional capacity, any money held or received by a firm on behalf of the granter is clients’ money and must be recorded as such within firm records. The guidance makes it clear that the amended rules only apply where a regulated person is appointed as attorney in a professional capacity, and not where a regulated person acts as attorney in a personal capacity (e.g. for a relative or a friend).

So to add to the list of points on which practitioners must be clear upon instructions is the capacity in which a solicitor is being appointed. If it is not clear, the presumption is that a solicitor has agreed to be appointed as attorney in his or her professional capacity. The guidance states that if a solicitor is being appointed in a professional capacity, practitioners should be taking clear instructions from clients on what is to happen in the event of the solicitor resigning, losing capacity or dying, as well as the event of the solicitor losing his or her practising certificate or having it suspended.

The guidance also states that it must be clearly evident from the file that the solicitor has discussed and taken instructions in this regard. Furthermore, power of attorney files should be retained until the power of attorney has come to an end. It is submitted that the routine correspondence need not be retained, but all pertinent meeting and other file notes and letters confirming instructions must be retained until such time as the power of attorney has come to an end.

Tailored to fit

The recent litigation in relation to continuing powers of attorney, and the amended practice rules and guidance, simply serve to reinforce what most practitioners are already aware of: one size does not fit all when it comes to drafting powers of attorney. Practitioners must ensure that the drafting matches the intentions of the granter and that detailed instructions have been taken on all salient points (and that those instructions are evident from the file!).

Notwithstanding the Great Stuart Trustees judgment, practitioners must ensure that the wording used in continuing powers of attorney unequivocally complies with s 15 of the Act. In this regard, the style power of attorney in Adult Incapacity by Adrian D Ward has stood the test of time. However, it is worth bearing in mind the cautionary words of Sheriff Murray in B v H: “If… the sentence derives from a style, those who have used it appear to have overlooked the meaning and purpose of a style.” Styles are useful, but practitioners should avoid an over-reliance on them!

Although the above focuses on continuing powers of attorney, it is important to note that similar care must be taken in relation to the drafting of welfare powers of attorney.

Practitioners should also have regard to all other points covered in the Society’s Vulnerable Clients Guidance and in its Guidance on Continuing and Welfare Powers of Attorney.