Jessica Jarvis

The legal framework governing the management of affairs for individuals lacking capacity has evolved substantially, guided by pivotal judgments from the Court of Protection (COP). Landmark cases including Re MWS, ACC v Others, and the subsequent Re PW have showcased the intricate scrutiny and elevated standards expected of professional deputies and trustees. Read on to explore how this decision transforms the field and its implications for fiduciary duty and care in my practice.

The Genesis: Re MWS [2015] EWCOP 94

The Re MWS case illuminated the potential for conflicts of interest when a deputy, the Irwin Mitchell Trust Corporation (IMTC), sought to appoint its associated company, Irwin Mitchell Asset Management (IMAM), for managing a client’s investments. Senior Judge Lush’s ruling was clear: while such appointments could proceed, they required strict safeguards to prevent abuse and ensure alignment with the client’s best interests. The judgment outlined options for IMTC, including developing a profession-wide protocol with the Office of the Public Guardian (OPG) or seeking explicit court approval for each appointment.

However, the aftermath of Re MWS revealed challenges in adherence and interpretation. Notably, IMTC’s reliance on informal email exchanges with Judge Lush, seeking to broaden the judgment’s application, exposed a disconnect between judicial directives and professional practices. The OPG and the Official Solicitor raised concerns, emphasising that formal judicial guidance should underpin practices, not informal communications.

The Evolution: ACC v Others [2020] EWCOP 9

The case of ACC v Others (ACC) built upon the foundations laid by Re MWS, delving deeper into the mechanics of authority and conflict of interest management. HHJ Hilder’s judgment addressed crucial questions, notably the extent of “general authority” and its implications for conducting litigation or taking legal advice on behalf of P. The rulings clarified that general authority does not inherently include the power to conduct litigation, thus requiring specific court authorisation for actions potentially presenting a conflict of interest.

Significantly, ACC also involved IMTC appointing their investment manager. The judgment stressed the necessity for obtaining multiple quotations for legal work and thoroughly documenting the decision-making process. This reinforced the importance of transparency, rigorous compliance, and the active management of potential conflicts at every step of decision-making.

The ACC judgment provided a roadmap for addressing conflicts of interest, emphasising the need for professional deputies to critically evaluate their authority’s limits and proactively seek court approval when necessary. This case, alongside Re MWS, marked a critical juncture in the COP’s stance on protecting the interests of vulnerable individuals from potential conflicts of interest.

The recent judgment of Re PW has once again brought the issue of conflicts of interest within the COP into the limelight, specifically focusing on the appointment of investment managers by professional deputies. This case, alongside the earlier case of ACC, delves into the complexities surrounding such appointments, with a particular emphasis on the roles played by IMTC and its investment arm, IMAM.

The Core of Re PW [2024] EWCOP 16

At the heart of Re PW lies a detailed examination of the conflict of interest arising from the appointment of IMAM by IMTC to manage the investments of a client, referred to as PW, who lacks the capacity to make these decisions independently. This scenario is not novel to the COP, as evidenced by the parallel drawn with the ACC case, which similarly scrutinised the conflict of interest concerning the same firm.

The court dissected the nature of the conflict, identifying it as a breach of the fiduciary duty owed by IMTC to PW. In this context, the court found that appointing an investment management company that is financially connected to the deputy constitutes a direct conflict of interest, as it could potentially sway the deputy’s decision-making process in favour of financial gain for its associated company, rather than prioritising the best interest of the person they represent.

Diverging Approaches to Investment Management

The judgment took a significant step in comparing the processes employed by IMTC with those of three other professional deputy firms, Mullis & Peake LLP, Hugh Jones Solicitors, and Warners Solicitors. Each firm showcased a distinct, transparent method emphasising conflict avoidance and prioritising client interests.

1. Mullis & Peake LLP employs a ‘beauty parade’ process that evaluates multiple investment managers against predefined criteria to ensure impartiality. Their approach actively involves clients and family members in decision-making, steering clear of any internal financial advisories to eliminate conflicts of interest.
2. Hugh Jones Solicitors engages in thorough discussions with clients and families about investment preferences and values. They solicit investment proposals from three to four managers, making decisions not just on paper but also based on interpersonal dynamics and trust established during presentations, ensuring choices are in the best interest of the client without any commercial ties to the investment firms.
3. Warners Solicitors prioritises the engagement of independent financial advisers or investment managers for long-term investments. Terrell’s firm conducts a ‘beauty parade’ of two or three advisers, ensuring that investment decisions are made with no conflict of interest, upholding the principle of acting solely in the client’s best interest.

HHJ Hilder confirmed however in her judgment that even with family involvement, such processes do not intrinsically eliminate the conflict of interest when a deputy appoints an associated firm, such as IMAM, for investment management. This directive challenges the prior assumption that beauty parades were sufficient in safeguarding against self-dealing.

What Next?

In a recent webinar hosted by the Professional Deputies Forum, Richard Dew, who represented the Official Solicitor in the landmark case of Re PW, provided vital insights into the judgment’s implications for professional deputies and trustees.

Dew’s analysis of the judgment underscores the imperative for deputies to conduct a rigorous evaluation of their appointment processes. While the practices of Mullis & Peake LLP, Hugh Jones Solicitors, and Warners Solicitors weren’t explicitly endorsed, their absence of critique from the court or questions from the Official Solicitor or the OPG suggest a pathway forward. This, however, is not an outright approval but a directive to ensure that implemented processes stringently mitigate any conflict of interest.

Crucially, Dew emphasised the need for retrospective applications in instances where deputies have previously appointed investment managers from which they stand to benefit financially. This step is essential to validate past decisions under the new guidance established by Re PW.

For situations where P had approved the appointment of a specific investment manager within an LPA document but has since lost the capacity to confirm or renew such instructions, Dew stressed the importance of a fresh best interests’ assessment. Deputies must ensure that continuing with the pre-approved investment manager remains in P’s best interests.