Recovering assets misappropriated by an attorney or deputy

The Alzheimer’s Society estimates that 209,600 people will develop dementia this year (one every three minutes) and that 70 per cent of people in care homes have dementia or severe memory problems. That information is hard enough to swallow but there is another layer. People with dementia are at higher risk of financial abuse and in our experience, the majority of allegations of financial abuse and misappropriation of monies against vulnerable individuals are against the very people trusted to look after their affairs. Sadly, the volume of those allegations is on the rise.

The Key Roles

A lasting power of attorney is a legal document designed to protect the maker (“the donor”) enabling them to appoint a trusted third party (or parties) to act on their behalf in the event that they lose the capacity to make decisions for themselves. There are two types of lasting power of attorney – one covers health and welfare and the other property and financial affairs. A lasting power of attorney must be filed with the Office of the Public Guardian (“the OPG”) while the maker still has full mental capacity.

In contrast, a deputy is a person appointed by the Court of Protection to make decisions on behalf of an individual who lacks the capacity and is unable to make those decisions themselves. A deputy can similarly deal with a person’s property and financial affairs, health and welfare or both.

Abuse of Power

Abuse of a power under a lasting power of attorney or deputyship order is unfortunately not uncommon. The attorney or deputy has access to the incapacitated individuals bank accounts and investments. They have the ability to take loans or apply for credit cards in the name of the incapacitated individual. They are able to make gifts from the incapacitated individuals assets. They could decide to move the incapacitated individual into care.

Preventing Financial Abuse

Abuse of a power of attorney is more often than not revealed either on the death of the vulnerable individual or at a point where a third party has sought to intervene by seeking the assistance of the OPG or the Court of Protection having become suspicious as to the actions of the attorney. In the case of the latter, if the evidential position is sufficient to support the concerns the likely outcome is that the power of attorney be revoked and a deputy be appointed by the Court of Protection which then becomes responsible for the affairs of the vulnerable individual.

Where there are suspicions surrounding the conduct of a deputy, an application may be made to the Court of Protection to revoke their appointment (and appoint an alternative deputy). Central to this application will be that the deputy was not acting in the incapacitated person’s best interests.

Whoever the perpetrator of the abuse, once it has been identified and stopped urgent consideration will need to be given to the possibility of legal action being taken against that individual. Whilst the Court of Protection has the power to order the attorney to compensate the donor for losses, it may be necessary to also report them to the police for fraud or theft and/or pursue civil proceedings in an effort to recover and/or preserve the assets of the donor.

Possible applicable civil action might be a claim for undue influence or a breach of trust and/or fiduciary duty claim and would extend to making an application for an injunction in order to prevent the perpetrator from disposing of, or dealing, with assets.

Practical Considerations

A deputy would require authority from the Court of Protection to litigate on the donor’s behalf. Proceedings to recover misappropriated assets or for damages would be pursued in the Chancery Division (the Court of Protection would not have jurisdiction).

Whether it is a deputy or executor (after the death of the incapacitated individual) that is tasked with investigating the financial abuse, the question of proportionality will be a central consideration in determining how far to pursue matters. It would not be in the best interests of the incapacitated individual, nor the beneficiaries of an estate, to aggressively pursue civil proceedings if the value of the potential claim does not justify the associated legal costs or the prospects of recovery are low (the assets have already been dissipated and the attorney does not have assets of their own against which to enforce an order). An application should be made to the Court of Protection or the Chancery Courts (as applicable) if there is any doubt as to how best to proceed.

In circumstances whereby there are suspicions that an incapacitated individual has been the subject of financial abuse independent legal advice should be sought at the earliest possible opportunity to increase prospects of success in preserving and/or recovering the donor’s assets.

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

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