High court ruling highlights the importance of understanding your powers under lasting powers of attorney in the ruling in Chandler v Lombardi

The recent case of Chandler v Lombardi [2022] EWHC 22 (Ch), heard by Jason Beer QC (sitting as a Deputy High Court Judge) reminds us of the restrictions on the power to make gifts when acting under a Lasting Power of Attorney (“LPA”).

The facts

The defendant in this case, Ms Lombardi, was her mother’s (Ms Chandler) financial affairs attorney. Ms Lombardi used her position as attorney to transfer a property owned solely by her mother, into the joint names of both herself and her mother. Ms Chandler’s son, who was appointed as the Executor of her estate, made a challenge to this transfer. The challenge was made following a series of suspicious facts, namely:

• Ms Lombardi’s appointment under the LPA was made without consultation of Ms Chandler’s son.
• There were numerous conversations between Ms Chandler and solicitors in respect of removing Ms Chandler’s other three children from her will, leaving everything to Ms Lombardi absolutely.
• Ms Chandler has a diagnosis of dementia and history of longstanding mental health issues.

A reminder of section 12 of the Mental Capacity Act 2005 (“MCA”)

Section 12 of the Mental Capacity Act 2005, ‘scope of lasting powers of attorney: gifts’, makes it clear that a property and affairs LPA does not authorise an attorney to make gifts that fall outside of the following exceptions:

a) on customary occasions (this includes on birthdays, marriages or civil partnerships, and any other occasion where gifts are usually given within families, friends or associates) to persons (including the attorney themself) who are related to or connected with the donor (in this case the donor is Ms Chandler); and
b) to any charity to whom the donor made or might have been expected to make gifts.
The value of the gift must be reasonable, having considered all the circumstances and, in particular, how this compares to the entire estate of the donor.

So, what did the court say?

As the transfer fell out of the scope of the powers mentioned in section 12 MCA above, it was held that Ms Lombardi’s failure to obtain permission from the Court of Protection to make the transfer meant that she lacked the sufficient authority to do so.

Was the transfer void or voidable?

Although these words sound very similar, the difference matters here.

Void – this means that the transaction was invalid at the time it was made.
Voidable – this means that the transaction can declared invalid after the event.

The transaction in this case was held to be void on the basis that the necessary authority to affect the transaction did not exist at the time the transaction was made. This distinction meant that the land register could be rectified, putting the property back into the sole name of Ms Chandler. If the transfer was to be held voidable, this could not have been done.

Ms Lombardi’s failure

The court made a point that not knowing that permission of the Court of Protection is needed to make a gift of this type does not provide a defence. The attorney has a responsibility to make themselves familiar with their powers and duties under the MCA and its accompanying code of practice, including the restrictions on gift giving.

The court pointed out that LPA documents are clear in this respect and contain the following declaration, signed by the attorney

"By signing this section I understand and confirm the following…I have a duty to act based on the principles of the Mental Capacity Act 2005 and have regard to the Mental Capacity Act Code of Practice".

The court further highlighted that the size of the gift in comparison to the rest of Ms Chandler’s estate and the circumstances leading up to the gift made the transaction ‘controversial and contentious’ and that in the judgement of the court, this was known to Ms Lombardi (paragraph 49).

The court concluded that an attorney wishing to make a gift of this type should take the necessary steps to understand the legal position and the authority required to do so.