POWER OF ATTORNEY — Enduring power of attorney  — Registration — Enduring power of attorney registered — Whether attorney able to effect subsequent gifts to himself out of bank account in joint names of donor and attorney without statutory authority or court approval — Enduring Powers of Attorney Act 1985, s 7(1)(c)

 

Day v Harris and others

Same v Royal College of Music and another (Arnold and another, interpleader claimants)

[2013] EWCA Civ 191;  [2013] WLR (D)  112

CA:  Rix, Lloyd, McFarlane LJJ:  20 March 2013

Section 7(1)(c) of the Enduring Powers of Attorney Act 1985 did not have the effect of preventing a person who was the attorney under a registered enduring power of attorney from benefiting himself out of the donor’s money in a manner not authorised by the enduring power of attorney without the approval of the court, provided that he was acting in a different capacity (such as that of an authorised signatory to a bank account in the donor’s name), and the donor retained sufficient mental capacity to consent to such an act and gave full, free and informed consent to its being done.

The Court of Appeal so held by a majority (Rix LJ dissenting) in a reserved judgment dismissing the appeal by the second and third defendants, Robert and Katherine Arnold, from paragraph 3 of the order dated 7 March 2012 of Judge Purle QC sitting as a judge of the Chancery Division by which he dismissed their claim for an account of sums of cash totalling £36,000 withdrawn from a bank account in the joint names of their late father, the composer Sir Malcolm Arnold, and the claimant, Anthony Day, his former carer. The withdrawals had been made during the closing years of Sir Malcolm’s life, following the registration of an enduring power of attorney by which he had appointed the claimant to be his sole attorney with general authority to act on his behalf in relation to all his property. The money in the account had belonged beneficially to Sir Malcolm and the claimant had withdrawn the sums in issue by means of cheques made out to, and signed by, him. It was his case that the sums had been gifted to him by Sir Malcolm with a view to saving inheritance tax by utilising annual exemptions. The second and third defendants claimed that he had acted ultra vires his powers or in breach of his fiduciary duties as an attorney, and should repay the money to Sir Malcolm’s estate. The judge held that the claimant had signed the cheques under the direct authority of Sir Malcolm and by virtue of the bank mandate, not the power of attorney. On the appeal the second and third defendants advanced a new argument to the effect that no such authority could validly have been given because of the provision in section 7(1)(c) of the 1985 Act that, following registration, “the donor may not extend … the scope of the authority conferred by the instrument and no … consent given by him … shall … confer any right … on the attorney …”.

The Court of Appeal also allowed in part an appeal by the second and third defendants from another order of Judge Purle QC, also dated 7 March 2012 [2012] EWHC 2041 (Ch) in a separate action in which, as interpleader claimants, they sought to establish that certain manuscripts of compositions by Sir Malcolm had been gifted to them during his lifetime, while others formed part of the residue of his estate rather than the subject matter of a lifetime gift or a specific bequest to the claimant. Many of the manuscripts were held by the Royal College of Music, the first defendant, which interpleaded. Sir Malcolm’s executor, Charles Harris, was also a defendant to each action.

LLOYD LJ said that the wording of section 7(1)(c) of the 1985 Act did not exclude all possibility of the attorney doing something which section 3(5) of the Act prohibited without the approval of the court, even if there was some other mechanism by which he could do it, subject to having the consent of the donor of the power. The whole of section 7(1) of the 1985 Act was concerned with the scope and effect of the power itself. It fixed the terms of the power as at registration. It was not intended to have a wider effect and to regulate any other subsisting relationship between the principal and the attorney. It remained open to the claimant to operate the bank account after registration of the power as he had done before. If he had the full, free and informed consent of Sir Malcolm, as the judge held he did, gifts made by drawing cheques as a joint account holder and authorised signatory without in any way relying on the power of attorney were not invalidated by section 7(1)(c).

MCFARLANE LJ delivered a concurring judgment.

RIX LJ, dissenting, said that registration of an enduring power of attorney was a watershed. The premise of registration was that the donor was suffering actual or incipient mental incapacity, circumstances in which the common law contemplated the cessation of any existing authority of a donor’s agent. To limit the entirely general language of section 7(1)(c) would seriously impair the structure and regime of the 1985 Act. The broad interpretation would prevent the danger of an agent taking advantage of his principal, and section 8 of the Act made specific provision for cases in which a donor wanted to give his attorney a gift beyond the scope of section 3. Section 7(1)(c) was intended to impose a general bar after registration upon the attorney acting on the donor’s instructions or consent outside the registered power.

Appearances: Andrew Twigger QC and Luke Harris (instructed by Birketts LLP, Norwich) for the second and third defendants in the first action/interpleader claimants in the second action; Michael Furness QC and Thomas Dumont (instructed by Leathes Prior Solicitors, Norwich) for the claimant in the first action; Michael Furness QC and Simon Edwards (instructed by Leathes Prior Solicitors, Norwich) for the claimant/interpleader defendant in the second action; the Royal College of Music did not appear and was not represented; the executor was present but took no part in the appeals.

Reported by: Alison Crail, Barrister.