8.1 General. Appendix B expresses our recommendations in the form of a draft Bill. The changes which we recommend should be made by amendments to the Conveyancing Act, 1919, and the Mental Health Act, 1958. The new provisions relating to initial unsoundness of mind, protected powers of attorney and physical handicap should go in the Conveyancing Act because they relate to the general law of powers of attorney, not to the statuses (of patient, incapable person and so on) which arise under the Mental Health Act. However, the new provisions relating to the effect on a power of attorney of the principal having or acquiring one of those statuses should go in the Mental Health Act, because those provisions modify what would otherwise be the effect of that Act.

8.2 Amendment of the Conveyancing Act. The Conveyancing Act would be amended by inserting a new division 2 in part 16, which deals generally with powers of attorney. The new division would apply only to powers of attorney given after the commencement of the new Act: ¹ it is better to take no risk of upsetting existing arrangements. Consequential amendments would be made to division 1 of part 16: we deal with these later. ²

8.3 Initial unsoundness of mind: general. The draft section on this subject (draft section 163E) is not concerned with cases where the instrument is void because, by reason of unsoundness of mind, the execution by the principal of the instrument creating the power is not accompanied by an intention to execute an instrument affecting his legal position, or he does not understand the nature of a power of attorney. The draft section is concerned with cases where the principal knows that he is executing an instrument creating a power of attorney and understands the nature of a power of attorney, but does not (or may not) understand, by reason of unsound mind, the nature of some or all of the acts within the scope of the power. In other words, the aim of the draft section is to provide a means for removing doubt about the effectiveness of a power of attorney which the principal intended to create and did create, not to give legal effect to an instrument which, by reason of initial unsoundness of mind, is merely an empty gesture. It is moreover a condition of the jurisdiction of the Court under draft section 163E (3) that there is a power of attorney. If a question arose whether the instrument was wholly void by reason of initial unsoundness of mind, the Court would have to determine the question. The determination would bind the parties to the proceedings as between themselves and would be persuasive for all purposes. By the terms of the draft subsection the principal. would be a necessary party. Who else would be parties would be a matter of court procedure, but probably the attorney would be a party.

8.4 Initial unsoundness of mind: the present law. Subsections (1) and (2) of the draft section 163E are intended to state the present law. ³ The subsections are there partly for the convenience of those concerned with applying the law, but mainly to provide a basis for subsections (3) and (4).

8.5 Confirmation in aid of certainty. Where the Court is satisfied on the facts that the nature of the acts within the scope of the power, or some of them, was initially within the understanding of the principal, or that, having mental capacity to do so, he has affirmed the power of attorney wholly or in part, the Court may confirm the power to an appropriate extent. Provision is made for affirmation by the principal because proof of capacity at the time of affirmation may be easier than proof of capacity at the time of the giving of the power of attorney.

8.6 Confirmation: protected power of attorney. In our scheme the protected power of attorney is saved from termination or suspension by reason of supervening unsoundness of mind, but it may yet be wholly or partly inoperative by reason of initial unsoundness of mind. Where the Court can see that a protected power of attorney is for the benefit of the principal, it should be able to cure defects or possible defects in the power by reason of initial unsoundness of mind. An occasion for the exercise of this paternal jurisdiction would not arise unless the principal lacked capacity himself to confirm the power or the existence of that capacity were itself in doubt.

8.7 Confirmation: incommunicate principal. The state of being “incommunicate” is discussed later. ⁴ Where the principal is incommunicate he cannot himself affirm his power of attorney and examination for the purpose of assessing his capacity will be difficult or impossible. It is not likely to be common that a man will have the double misfortune of (a) being of questionable soundness of mind when giving a power of attorney and (b) afterwards becoming incommunicate. If he does, however, he will stand in as much need of this paternal jurisdiction to confirm his power of attorney as would a principal who has given a protected power of attorney and has afterwards come into a state of unsound mind.

8.8 Effect of confirmation. An order of confirmation would aid the validity of things done by the attorney after the order of confirmation takes effect but would not disturb the effect of things done before that time. Within this limit of time, the order would have effect as if the principal were of full capacity and himself confirmed the power. Questions of initial incapacity would thus be overcome.

8.9 Exclusion of jurisdiction to confirm. It may be that a principal will be unwilling to submit his affairs to the paternal jurisdiction which we recommend in cases where there is a protected power of attorney and where the principal is incommunicate. It is not for us nor, we suggest, for the legislature to attempt to foresee, and to weigh the sufficiency of, the wish of a principal to exclude this jurisdiction to confirm. If the principal wants to do so, there is no reason why the law should hinder him. Our draft Bill has a subsection covering the point. By the general law, his exclusion of the power to confirm would fail if, by unsoundness of mind, he lacked understanding of the effect of the exclusion.

8.10 Supervening unsoundness of mind: the present law. Subsection (1) of the draft section 163F is intended to state what we think is the present law. Again, the subsection is put in partly for the convenience of those applying the law but mainly as a basis for substantive changes in draft sections 163F (2) and 163G. Draft section 165F (1) speaks affirmatively of the power of attorney being “effective” rather than negatively of the power of attorney being suspended: it does so in order to leave room for cases where, by the present law, an agency persists notwithstanding the unsoundness of mind of the principal. These cases are not fully explored by the reported decisions, but, as an example, it may be that the unsoundness of mind of one partner does not by itself affect the authority of another partner to bind him. ⁵

8.11 Protected power of attorney. Draft section 163F (2) would give effect to the main recommendation of this report. A protected power of attorney is one which appears, by the instrument creating it, to be intended by the principal to continue notwithstanding that he afterwards incurs any loss of capacity through unsoundness of mind. ⁶ There are thus two requirements of form and two only. First, in accordance with the general legal concept of a power of attorney, the power must be created by an instrument. Second, there must be an expression in that instrument of the requisite intention.

8.12 Protected power of attorney: the risks. Draft section 163G provides for judicial control in two cases: where there is a protected power of attorney, and where a principal is incommunicate. We deal later with the case where the principal is incommunicate. ⁷ Giving a power of attorney always carries some risk. The attorney may turn out to be incompetent or inert or dishonest. Where the principal remains of sound mind he can keep the risk within bounds by getting accounts and other information from the attorney and, if he thinks fit, by revoking the power. These safeguards may be absent if the principal becomes of unsound mind. He may for that reason be unable to himself control the attorney and, unless he has made special. arrangements, there will be no one to do so on his behalf. There is thus a risk involved in the scheme for protected powers of attorney and the law should guard against that risk.

8.13 Judicial Control. Our recommendation is that the Supreme Court should be authorized to do some acts in relation to the power of attorney which the principal might do for himself if of sound mind. We shall deal later with the particular powers of the Court: we note for the present that the Court may remove an attorney from office, may appoint a new attorney, may make orders for accounts and information, and may revoke the power.

8.14 Application for court orders. Under the draft section 163G (2) the powers of the Court are exercisable only on application by the principal. Since the section is intended for use when the principal is of unsound mind we should discuss the intention behind this arrangement. The section enables the Court to do things which the principal might do if of sound mind. If, therefore, a principal applied for orders under the section, and it appeared to the Court that there was no question of soundness of mind, the Court would as a rule refuse his application because approach to the Court was not necessary. The real operation of the section in the case of the protected power of attorney is where the principal is of unsound mind or the soundness of his mind is in doubt. The section is designed to operate in the context of the procedure of the Supreme Court in proceedings where a party is, owing to the mental illness, incapable of managing his affairs in respect of the proceedings. He is then a mentally disable person for the purposes of the rules of court and an application to the Court may be made in his name by another person as his next friend or tutor. ⁸ To state the position in reference to the draft section 163G, an application under the draft section in the name of a principal could be made by any person as his tutor. ⁹ If the principal thought that he, the principal, was not a mentally disable person, he could seek a decision of the Court on that question and, if he succeeded, proceedings on the application under the draft section would be dismissed or stayed. ¹⁰ Apart from the case where the principal raises the question, there is no need for evidence of unsoundness of mind. If it was thought that the application was not for the benefit of the principal, any one could apply in his name for an order that the proceedings be stayed. ¹¹ Even in the absence of an application for stay, the Court would not make an order under the draft section unless it appeared that the order would be for the benefit of the principal. ¹²

8.15 Avoidance of stigma. The procedure just described is attractive because in the general run of cases there will be no inquiry into, nor any finding of, unsoundness of mind. There will thus be avoided the hurt to the feelings of the person concerned and his family and friends which is commonly caused by Court determinations of unsoundness of mind. This result is achieved at the price of expressing the legislation in a way which will not convey its full effect to those unfamiliar with court procedures. But the price is worth paying.

8.16 Removal, appointment of new attorney, revocation. Paragraphs (a), (b) and (e) of the draft section 163G (2) are, we think, straight-forward enough. They will enable the Court to get rid of a bad attorney, to fill vacancies, and to put an end to the power of attorney altogether if one of those courses appears to be for the benefit of the principal. The draft section has in it the implication that the power of attorney will not be altogether terminated by, say, the death of the attorney but will remain on foot so as to support an appointment of a new attorney by the Court. This is some departure from ordinary notions of the law of agency, but we see no harm in it.

8.17 Accounts and information. The power to make orders for the furnishing of accounts and information needs some explanation. If the principal were of unsound mind, proceedings for this purpose might be brought under the general law in his name by some person as his next friend or tutor. But in the ordinary course this would lead to the tutor having access to the accounts and information and he may seek that access for some purpose irrelevant to the benefit of, or inimical to, the principal. It may be that the powers of the Court under the general law are sufficient to guard against this abuse, but it seems as well to enact specifically that the Court may make orders for preventing unnecessary disclosure of the affairs of the principal.

8.18 Variation of powers and rights. Paragraph (c) of section 163G (2) is not concerned with controlling the attorney or seeing that the intentions disclosed by the instrument creating the power are realized. Paragraph (c) is rather concerned with altering the scope of the power of attorney or the relationship between principal and attorney in cases where the Court can see that the alteration is for the benefit of -the principal. The principal may have given a power of attorney to an honest and capable attorney and, the principal having become of unsound mind, it may appear to be for his benefit that the attorney should carry out some transaction which is, or may be, beyond the scope of the power of attorney. For example, it may appear to be for the benefit of the principal to make a settlement of property, or to take part in a reorganisation of a company, to soften the impact of a change in the taxation laws. If the attorney and any other interested person consent, then the Court can make the alteration. “Interested person” here means a person with a legal interest, that is, one whose legal position is affected by the alteration. Again, the power of the Court is to do something which the principal himself might do if of sound mind.

8.19 Exclusion of the powers of the Court. We think that the Court should have power to revoke a protected power of attorney no matter what is said by the instrument creating the power. There is too great a risk of things going wrong if an attorney is altogether uncontrollable. And the existence of a power to revoke may render unnecessary the more drastic methods of getting rid of a power of attorney, i.e., proceedings for management of property under the Mental Health Act. In the presence of this ultimate safeguard of a power to revoke, it appears to us to be safe to allow a principal, if he thinks fit, to limit the powers of the Court over his own power of attorney. Draft section 163G (5) is directed to these purposes.

8.20 Effect of order. Following further the concept that the Court stands in the place of the principal who, through unsoundness of mind, cannot act for himself, a removal, appointment, alteration or revocation by order of the Court has effect as if done by the principal. ¹³

8.21 Incommunicate principal: the problem. A principal may incur some defect such as coma or paralysis which makes him unable to receive communications, or unable to express his will, respecting his property and affairs. Such a defect may or may not amount to unsoundness of mind, ¹⁴ but in the nature of things could not be shown to affect his ability to understand the nature of business transactions. The defect therefore would not affect his power of attorney, yet it would prevent him from supervising the attorney and it would prevent him from revoking his power of attorney. His affairs are thus placed in a state of risk resembling the risks which would arise if the law permitted the giving of a protected power of attorney without provision for control and supervision such as that which we have framed in the draft section 163G.

8.22 Incommunicate principal: the solution. Draft section 163Gwould apply to a power of attorney if the principal became incommunicate. The difficulty is that the defect which prevents him from controlling his attorney also prevents him from applying to the Court, yet does not, or at least may not, amount to mental illness so as to open the way for the commencement of proceedings in his name by some one else as his next friend or tutor. Our solution is the draft section 163H. This draft section would enable proceedings under the draft section 163G to be taken on behalf of an incommunicate principal, would give power to regulate such proceedings by rule of Court, and would provide that, subject to rules of Court, the procedure in the case of persons of unsound mind is to apply.

8.23 Consequential amendments to the Conveyancing Act. Some consequential amendments are merely formal and we say no more about them. ¹⁵ The protections of an attorney and third parties in case of transactions without notice of termination of a power of attorney are extended to cases of transactions without notice of suspension of a power of attorney. ¹⁶ This does no more than express the policy of the present legislation. Criminal liability is put on an attorney who acts notwithstanding knowledge of the suspension of the power of attorney. ¹⁷ Again, this does no more than express the policy of the present legislation.

8.24 Powers of attorney and the Mental Health Act. We have pointed out the obscurity of the law on the effect on a power of attorney of a management under the Mental Health Act. ¹⁸ We think that the law should be clarified. It remains to add that it may be found convenient to allow the power of attorney to have some operation while the property of the principal is subject to management under the Act, and it may seem right to terminate or restrict the power of attorney so that it will not come into operation, or fully into operation, on the property of the principal ceasing to be under management. The draft new section 110Aof the Mental Health Act has these objects in view. ¹⁹

R. D. CONACHER, Deputy Chairman.
D. GRESSIER, Commissioner.

6th January, 1975.
 

2. Paragraph 8.23 below.

3. See paragraphs 3.2, 3.3 above.

4. Paragraph 8.21 below.

5. Lindley (1962) p. 590, note 72; Halsbury’s Laws of England, 2nd edn. vol. 28 (1959), p. 567, note (o).

6. Draft section 163D.

7. Paragraphs 8.20, 8.21 below.

8. Supreme Court Rules, 1970, pt 1 r. 8 (1); pt 63 generally. Beall v. Smith (1873) L.R. 9 Ch. App. 85; Jones v. Lloyd (1874) L.R. 18 Eq. 265; Porter v. Porter (1888) 37 Ch.D. 420.

9. There are some exceptions to the proposition that the application might be made by any person, but the exceptions do not matter here. See Supreme Court Rules 1970 , pt 63 r. 4.

10. Palmer v. Walesby (1868) L.R. 3 Ch. App. 732; Pope (1890) p. 329.

11. Howell v. Lewis (1891) 61 L.J. Ch. 89; 65 L.T. 672; Didisheim v. London and Westminster Bank [1900] 2 Ch. 15, 43, 44; New York Security and Trust Co. v. Keyser [1901] 1 Ch. 666; Pope (1890) pp. 326, 327.

12. Draft section 163G (2). See also Jones v. Lloyd (1874) L.R. 18 Eq. 265, 272; Porter v. Porter (1888) 37 Ch. D. 420; Wilder v. Pigott (1882) 22 Ch. D. 263.

13. Draft section 163G (6).

14. In re Barber (1888) 39 Ch. D. 187; Kirby v. Leather [1965] 2 Q.B. 367, 387B, C.

15. Draft Bill s. 2 (a), (b).

16. See the amendments to the Conveyancing Act, ss. 158, 161, 162 by the draft Bill s. 2 (c), (d), (e).

17. See the amendments to the Conveyancing Act ss. 158, 162A by the draft bill s. 2 (c), (f).

18. See paragraph 3.5 above.