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Chandler v Lombardi: an update on gifting – unauthorised transfer of assets by attorney

Amy Floater has over a decade’s specialist experience in Court of Protection matters and has acted as a professional Deputy for many clients throughout her legal career. Amy also has expertise in dealing with other supplementary applications to the Court of Protection including Statutory Wills, Appointment of Trustees, Gifting and obtaining Specific Authorities for lay Deputies in a variety of situations.

Here, Amy reflects on the recent High Court case of Chandler v Lombardi [2022] EWHC 22 (Ch), which highlights the repercussions of attorneys acting outside the scope of their authority when appointed under Lasting Power of Attorney (LPA) documents.

Case background

In 1993 Concetta Chandler (Concetta) made a will, which left her estate to her four children in equal shares.

The case involved two of Concetta’s children, Anthony Chandler (the Claimant) and Janet Lombardi (the Defendant).

In 2016 Concetta provided instructions to her solicitors that she would like to prepare LPAs for both Property and Financial Affairs and Health and Welfare and also that she wanted to transfer half of her property to the Defendant.

It is important to note that the solicitors declined to act in relation to the instructions given for the property transfer but proceeded in the preparation of the LPAs for Concetta, which were registered in November 2016. It was only at this point that the Claimant became aware of their existence.

In January 2017, Concetta’s husband passed away and the Defendant took on the role of caregiver for her mother, doing so at her mother’s property.

That same month, the Defendant visited a solicitor to seek advice on the ownership of her mother’s property, claiming that her mother wished for her to have the whole property, due to the care and support she was providing.

In November 2017 Concetta was admitted to hospital and was found to be suffering with dementia and delirium. Accordingly, a Deprivation of Liberty Order was put in place for her.

In January 2018, the local authority assessed Concetta and found her to be lacking in capacity to make decisions regarding her residence.

A few months later, relying on the Property and Financial Affairs LPA which had been put in place, the Defendant executed the transfer of her mother’s property into their joint names.

By 21 June 2018, Concetta had been assessed as lacking capacity ‘to make most decisions’.

The Claim brought to the Court by the Claimant was initially done as litigation friend for Concetta, as he sought a declaration that the transfer of the property completed on 4 June 2018 was void. He also obtained interim injunctive relief from the Court.

Court’s findings

This case highlights a number of issues: –

i)     whether the Defendant had the authority to transfer the property to herself, acting under the Property and Financial Affairs LPA;
ii)    if it was found that the Defendant was acting beyond her powers in her role of attorney, was the transfer to be deemed by the Court as void or voidable; and
iii)   what, if any relief, should be granted by the Court.

The Court found that the Defendant did not have the authority under the Property and Financial Affairs LPA to execute the transfer of the property.

Section 12 of the Mental Capacity Act 2005 limits an attorney’s power when making gifts. It is important for attorneys to realise that they can only give gifts to family or friends on customary occasions or to charities The Act also sets out that the gift must not be an unreasonable amount.

In this particular case the Court held that whether Concetta had the capacity to execute the transfer to make the gift of half her property was not relevant to the facts of this case. Instead, they considered the key issue to be whether the transfer carried out by the Defendant was effective.

In doing so, the Court had to consider whether the transfer was void or voidable, the difference having a significant impact on whether the rectification of the land register could take place.

The Court found the disposition to be void and ordered that the register could be rectified.

The Defendant tried to argue that she was neither aware nor advised by her solicitor of the need to seek the Court of Protection’s authority to make the gift. Her argument was rejected by the Court.

The Court commented that what the Defendant had done was a controversial and contentious step to take, especially as the property transfer resulted in a significant reduction in Concetta’s estate.

The Court also said that the Defendant should have taken steps to inform herself of the legal position and taken specific legal advice. My view is that attorneys ought to be aware that ignorance is rarely considered a sufficient defence when acting in an important role of this nature.

Comments

The case serves as a stark reminder to attorneys – and deputies acting on behalf of the Court of Protection – to check their authority when dealing with certain transactions before acting.

Attorneys and deputies may not realise that they have limits placed upon them under Section 12 of the Mental Capacity Act 2005. Since many lay attorneys and deputies will be unfamiliar with this Section of the Act, it is often the case that they will act beyond the scope of their authority.

The case also highlights the importance of checking donor capacity at the time the decision is being made. This is particularly key when substantial capital decisions are being made; attorneys would be wise to consider whether the donor is able to have any input into such significant decisions. Attorneys may also wish to take into account any historical gifting made by the donor prior to their loss of capacity – although of course, the financial circumstances of the donor may have changed.

Something being void or voidable makes all the difference to the relief the Court can apply.

There are restrictions on the types of gifts that attorneys and deputies can make. Any large gifts have to be authorised by the Court of Protection. Attorneys can only authorise small customary gifts on behalf of the donor and should keep in mind that these gifts should always be reasonable in the context of the donor’s overall estate.

In the event a transaction has already taken place, there may be an opportunity to apply to the Court of Protection and make an application for retrospective authority. However, it is far preferable that attorneys and deputies have taken advice prior to authorising a transaction; that the application is prospective, and the permission is granted before any action is taken.

Attorneys should bear in mind that an application does not mean automatic approval, especially if the Court of Protection does not view the gift as being in the donor’s best interests.

For help and advice in this complex area of the law, please contact Amy on (01482) 325242 or email amy.floater@andrewjackson.co.uk

 

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