Should a Trust Corporation be a Deputy?

Earlier this year the Court of Protection set down guidelines in relation to the appointment of Trusts Corporations as Deputies. (re: The Appointment of Trust Corporations as Deputies [2018] EWCOP3.)

Since the introduction of the Mental Capacity Act (MCA) 2005, it has been the practice of many larger more corporate firms of solicitors to set up a limited company as a trust corporation. That limited company can, as a legal body, be appointed as both trustees and deputies under s.19 of the MCA 2005.  A trust corporation cannot however be appointed to act under a welfare order.  From an operational point of view, there are some advantages to utilising a trust corporation to act as property and affairs Deputy.  Her Honourable Judge Hilder identified three main advantages to this structure being: continuity, availability and professionalism.

Corporations are generally more flexible in terms of operations when considered against the appointment of a sole Deputy. A corporation can have an unlimited number of directors and other officers, so as day-to-day management can be covered efficiently. For example, multiple directors can cover absences caused by leave, sudden sickness or even death. Financial or other hardship might be caused if a specific transaction or payment is delayed because a named individual is required to act as sole decision-maker and is unavailable.  Therefore, the added operational flexibility that a corporation provides might be an important consideration for the client, to cover such eventualities.

Perhaps the most significant issue is succession. Deputyships and trusteeships are personal appointments, albeit that a company can be a legal person in this respect. A Deputy is appointed by Court order and so it is necessary to go back to the Court for permission if a transfer over to a new proposed Deputy is to be affected and approved That can be time consuming, disruptive and expensive for the client.  The directors in a corporation can be changed simply, without a corresponding effect on the assets managed with that particular trust (e.g. there will be no need for re-registration of assets or holdings or a change in ownership details).

The recent consideration given by the Court on the manner in which trust corporations are being utilised within the profession, looks at the pros and cons of a trust corporation being appointed Disruption around succession and the costs of transfer were issues that the Court identified as advantages of trust corporations.  However, these benefits were identified as being focused on procedural or financial factors which are not the only relevant consideration when contemplating the appointment of a property and affairs Deputy. Hilder indicated that “deputyship generally also requires an appropriate person-to person interaction” which is extremely important in these often sensitive and complex cases.  At our firm, we very much value the personal interaction we have with our clients, frequently, through sustained periods of time.

Concerns as to the appointment of a corporation included a Deputy’s avoidance of personal liability, through the limited liability of companies. Further concerns cited were the difficulty to supervise a company, either by the Office of the Public Guardian or the Court, having instead to rely on the corporation self-reporting on its efficacy and ability to act, with a declaration of truth.  It was also noted that with a personal appointment, an individual is likely to be appointed for a small number of clients whereas a corporation will potentially act for a greater volume of cases aggregating a larger risk to the client base should there be any issues with subsequent non-compliance.

The Court considered these points and set out the requirements that should be met, and the undertakings given, if a. corporation is to be appointed as property and affairs Deputy. Hilder stressed that trust corporations can only be used if the trust corporation is authorised by the SRA, or all the directors of the trust corporation are solicitors and the trust corporation is linked to an associated legal practice covered by professional indemnity insurance. The trust corporation itself is not to be allowed to employ staff save for a company secretary. The firm of solicitors with whom the corporation is linked should engage the lawyers working on the case. The Court of Protection then set out further requirements, namely that the firm’s professional indemnity insurance has to meet the SRA’s minimum terms and conditions and that a copy of that policy would be lodged with the Public Guardian on appointment.  The corporation will be under a duty to inform the Public Guardian if there is any reduction or change in the terms or level of the insurance cover. Hilder has called for these requirements to be incorporated into a standard COP4 Declaration that is required to be filed at the Court of Protection when making any Deputyship application.

In effect, the Court of Protection has sanctioned the use of trust corporations, if properly regulated and insured. The Court is of course concerned with the best interests of the protected party. As such they want to keep costs down, but most importantly ensure that the protected party gets good service and consistency.

If a professional Deputy is acting outside of a trust corporation, then succession is a commercial issue for that practice. Professional Deputies are paid for their services. The Deputy might be an employee or partner in a firm of solicitors, who might move jobs. The firm will wish to retain that client. Most solicitors are required in their contract of employment to pass their clients to the firm on leaving. However, as the appointment of a Deputy is personal, in practice a transfer is difficult, if the client or their family object. The prospect of an unseemly fight over a client is not attractive to most firms, especially if it costs the client money. Hence a trust corporation suits the commercial ends of the firm of solicitors.

The question of whether it is right to recommend a trust corporation to any particular client is nuanced. A Deputyship is a personal appointment and for good reason. The service a Deputy gives is personal and based on a relationship of trust. Should P or their family “trust” a limited company x with power over many aspects of their life?  From our experience, clients and their families prefer a personal named appointment as opposed to a generic corporation with varying directors which clients perceive as being more difficult to establish long-lasting working relationships with.

Many of our clients do want a personal connection with an individual responsible for their finances and to some extent welfare. Family members also prefer to know that the buck stops somewhere. Some feel, rightly or wrongly, that a director of a company, who might change, does not feel as engaged as the person they can see in front of them.  Whilst they might be persuaded by their trusted lawyers to appoint a trust corporation, it is important that they are given an informed choice.

One solution to the practical problems, which delivers much of the costs savings, is to appoint joint professional Deputies. We offer clients the option, aside from seeking a professional Deputy outside Anthony Gold, of two partners in the firm being appointed.  This is a practical solution that works well and addresses all of the concerns debated in this case about covering absences, creating additional availability and delivering a cost-effective, professional service.

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