§ 3.17 p.m.
§ The Lord Chancellor (Lord Hailsham of Saint Marylebone)
My Lords, I rise to move that this Bill be now read a second time.
It is, as your Lordships will be hearing, basically a Law Commission Bill. It represents, at any rate, a valuable measure of law reform. Under the present law, a power of attorney is revoked automatically when the donor of the power becomes mentally incapable, and yet, paradoxically, it is precisely at that time that the donor is particularly in need of someone who can manage his affairs. During the past week alone, I have had drawn to my attention the case of one man who holds his mother's power of attorney. His mother has become mentally incapable and the son has therefore been told that he can no longer handle her affairs, because the power no longer subsists.
The only option now available to relatives is to apply to the Court of Protection for a receiver to be appointed. Although the procedure of that court has been greatly improved in recent years, it can be both complicated and expensive. Moreover, a receiver can be appointed only where medical evidence is provided that the patient is completely mentally incapacitated. There is no provision at present for the twilight period between full mental capacity and total incapacity. The scheme contained in this Bill will, I hope, help to deal with all these problems. It is intended to provide a quick, cheap and simple method of dealing with the affairs of the mentally ill, including those who are merely confused.
To all intents and purposes, the Bill is identical with that annexed to the Law Commission's report entitled The Incapacitated Principal, which was laid before Parliament in July last year. In this connection, our thanks are due to the chairman of the Law Commission, to the. Law Commissioners who signed that report—there have, of course, been a series of changes in the personnel since then—and to all the officials who worked on it, for having produced what I hope your Lordships will consider an acceptable scheme for dealing with the affairs of the mentally incapable.
The Court of Protection was consulted throughout the preparation of the scheme, and many of its comments have been incorporated. I am glad to say that the Court of Protection is happy with the scheme proposed by the Law Commission; it is not intended to 1116 challenge the existing powers of the court, but to supplement them. I am particularly glad to be able to introduce the legislation a little over a year after the Law Commission submitted its report.
The scheme will work in the following way. It in no way affects the existing right of individuals to give what I might call ordinary powers of attorney. These will be governed by the existing law, in particular the Powers of Attorney Act 1971, but these will lapse, as now, on the supervening mental incapacity of the donor. The Bill, however, will create a new species of power of attorney, known as an enduring power, which will continue in force even if the donor of the power does become mentally incapacitated.
But to be an enduring power, a power of attorney must satisfy a number of stringent requirements. The instrument creating the power must be executed both by the donor and by the proposed attorney. This instrument must be in a prescribed form, and must contain explanatory information intended to make it clear to the donor that the power which he is creating will allow the proposed attorney to deal with his property even were he to become mentally ill.
In addition, the instrument will contain a statement by the donor that he has read (or has had read to him) this explanatory information; a statement by the proposed attorney that he understands that, if he believes that the donor is or is becoming mentally incapable, he has a duty to register the instrument creating the power with the Court of Protection.
These and other detailed characteristics of an enduring power are set out in Clause 2 of the Bill.
Clause 3 makes it clear that the donor may restrict the power of his attorney, or place conditions on its exercise. The scope of the attorney's powers may thus be limited; but otherwise the attorney may do on behalf of the donor anything which the donor could lawfully have done. For instance, this may include a disposition of the donor's property in any way in which the donor might himself have disposed if it. Thus the attorney may make gifts to a charity, may make on behalf of the donor birthday, wedding, Christmas or other presents which the donor might have been expected to make, including gifts, as it were, to himself.
Clause 4 sets out the duties of the attorney when he has reason to believe that the donor is, or is becoming, mentally incapable. He does not have to wait until the donor is completely mentally incapable. Nor is any medical certificate required. As soon as, in his judgment, the mental state of the donor is such that he is not capable of properly managing his own affairs, the attorney must apply to the Court of Protection for registration of the instrument creating the power. But he must first give notice of his intention to do so to a number of relatives of the donor (the details are set out in Schedule 1) and, of course, also to the donor himself. It is this provision which will enable the donor to assert that, far from being incapable of managing his own affairs, he is in full possession of his faculties and has no wish to have his affairs managed by anyone else.
In the case of such a conflict, the matter would have to be resolved by the Court of Protection. Clauses 5 and 6 set out the functions and powers of the court 1117 prior to registration and on an application for registration. I draw attention in particular to Clause 6(5), which sets out the grounds on which objection may validly be taken to the registration of an instrument, and in particular to paragraph (c). It is under that provision that the court is empowered to decide that the application for registration is premature because the donor is not yet becoming mentally incapable.
Once the instrument creating the enduring power has been registered, the affairs of the donor pass completely into the hands of the attorney. The legal position is set out in Clause 7. In particular, your Lordships will see that the donor, now presumed to be mentally incapable, can no longer revoke the enduring power unless and until the court confirms such a revocation, and that the attorney cannot disclaim his obligations under the power without first giving notice to the Court of Protection. The donor's affairs are still, ultimately, subject to the supervision of the Court of Protection. Although the court will not be managing them from day to day, it has a number of functions with respect to a registered power. These are set out in Clause 8, with the ultimate sanction of cancelling the registration for any of the reasons set out in subsection (4).
It is of course important that third parties should be able to deal with the attorney in the confident knowledge that his authority to deal with the donor's affairs is valid, and that any transactions cannot suddenly be set aside. Clause 9 provides this necessary protection, and your Lordships will see that a third party who is dealing in good faith with an attorney under a registered power has the necessary protection.
It is, of course, possible—indeed, perhaps likely—that the donor may wish to appoint as his attorney not a single individual, but a number of individuals as joint, or as joint and several attorneys. These may, for example, be members of his family, or partners in a firm of solicitors or accountants. Clause 11 of the Bill, together with Schedule 3, make the necessary modifications in such a situation.
I have explained that before applying to register the instrument creating the power, the attorney is normally under a duty to notify, not only the donor, but also a number of his relatives, in order that they, too, may have an opportunity to object to registration. The Law Commission thought that this provision was necessary in particular where the attorney was a member of the donor's family, and other members of his family might not share the attorney's views on whether it was appropriate at any given time to apply for registration, with the implication that the donor was no longer fully in possession of his faculties.
This will not necessarily apply where the attorney is a professional representative of the donor, such as his solicitor or accountant, and Clause 12 empowers the Lord Chancellor by order to exempt attorneys falling into specified categories from the requirement to give notice to relatives prior to registration. But it is always incumbent on the attorney to give notice to the donor himself.
My Lords, I hope that, without being intolerably wearisome, I have sufficiently explained the details of 1118 the scheme. The basic idea is simplicity. It is intended to be, and I believe that it is, a scheme which may be used without the assistance of a lawyer. It is not a revolutionary change in the law, but it deals with an area of important social concern, and will be of great assistance to those who are concerned to ensure that their affairs are properly managed when they themselves are no longer able to do so, and likewise to those responsible for managing the affairs of others. Similar schemes have been in operation for some time in other common law jurisdictions, and I believe have worked successfully. I have no doubt that the Bill, too, will be of assistance to the increasing number, perhaps particularly, of elderly people in our community, and I commend it to your Lordships. My Lords, I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
§ Lord Elwyn-Jones
My Lords, I welcome this Enduring Powers of Attorney Bill with its rare but promising note of durability. That is explained by the nature of the new power to which the noble and learned Lord has referred rather than to any special qualities in this Bill not possessed by all legislation introduced by this or by any other Government.
This Bill is the outcome of yet another valuable contribution by the Law Commission in identifying amendments required in the law itself to meet newly-identified needs of the public. If my noble and learned friend Lord Gardiner were here, I suspect that he would subject the noble and learned Lord the Lord Chancellor to the annual exercise to which he has subjected me; namely, to ascertain from the noble and learned Lord not only how many Law Commission recommendations containing law reform proposals have been implemented in legislation but—more importantly—how many have not been implemented. I do not suppose that the noble and learned Lord has that information at his fingertips just now, but perhaps he will allow me to refer to it the next time a piece of Law Commission legislation—if I may so describe it—comes before us.
The subject matter of this Bill has been under consideration for many years. Indeed, the Law Commission published a working paper on it in 1976—so I cannot at any moment in time point to one particular administration for any delay which has taken place. It is a complex and difficult but important subject. The Law Commission, as is its practice, has been engaged in careful consultation with a wide range of interested authorities, societies and persons with experience and expertise in this field. I believe it is now generally agreed that the new enduring power of attorney will help to relieve the problems which, unhappily, arise when the donor of the power of attorney suffers subsequent incapacity.
I agree that it would be a beneficial provision and useful and inexpensive alternative to receivership proceedings. It is of course necessary to protect—as the Bill seeks to do—the donor's interests against exploitation. The Bill also applies criminal sanctions 1119 against any dishonest attempt by an unregistered attorney to undermine the registration procedure. Existing criminal law already punishes acts of dishonesty committed by an attorney—happily, a rare event in any case. But it would seem that the subject and the public are usefully protected by the provisions of this Bill.
I have little doubt that in a Bill of such detail and complexity, a number of matters will arise for examination in Committee. In the meantime, I expect that the whole House—and certainly those of us on side of it—will welcome this Bill.
§ The Lord Chancellor
My Lords, I am extremely grateful to the noble and learned Lord my predecessor for having given a very warm welcome to this Bill, and I am very grateful for what he said.
He is right in thinking that I would not be able to reply at this moment to the putative cross-examination by the noble and learned Lord, Lord Gardiner, whom we all regret is not able to be here, as he so often used to be. He was a great protagonist and indeed the father of the Law Commission. It is one of the permanent institutions which has greatly helped the cause of law reform in this country.
However, I believe that the Lord Chancellor's Department, under the three Lord Chancellors—or perhaps I should say, four—who have succeeded the original institution have done pretty well in carrying through Law Commission reports. A number of them operate in fields which are outside the department's departmental responsibility. For example, criminal law is a matter for the Home Office; and various forms of consumer law—such as that dealing with the sale of goods—and other types of commercial law fall within the responsibility of the Department of Trade and Industry. I believe it could probably be said that the Lord Chancellor's Department has been more successful in sponsoring legislation than perhaps some of the others. However, it is not for me to criticise them.
Another enemy of law reform is parliamentary time. This House will remember only too well the traumatic passage of the Matrimonial and Family Proceedings Bill through the last Session, which carried three Law Commission reports along with it.
There is also the sheer question of money. Sometimes, one is prevented from doing what one would wish to do in the field of law reform because of the extra cost in expenditure on the courts. But on the whole, I believe that we are doing well. What is quite certain is that we would be doing a great deal less well if the Law Commission was not in being and active. This time, we have done quite well because since the commission reported, only about a year has elapsed. I am grateful for all that the noble and learned Lord has said and I agree that we shall have to go into some little detail in Committee if amendments are passed down or are proposed, or, alternatively, if there are debates on the Question, That the clause shall stand part of the Bill. In the meantime, I am very grateful to the noble and learned Lord.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.