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Vulnerable vs incapacitous: introduction to mental capacity and supporting clients with fluctuating mental capacity

Posted on 14 October 2021

The Mishcon Academy Digital Sessions. Conversations on the legal topics affecting businesses and individuals today.

Molly Hunter
Hello and welcome to the Mishcon Academy Digital Sessions Podcast.  I’m Molly Hunter and I am an Associate in the Private Wealth Disputes Team at Mishcon de Reya.  I’m joined by my colleague, Bethan Byrne.  You are listening to the first podcast in a series focussing on vulnerable clients and mental capacity.  In this first episode we are going to focus on mental capacity.  What do we mean by mental capacity?  How do we test for it?  What happens when someone has fluctuating levels of mental capacity in the wider context of the provision of legal advice and how do we support clients who fall into this category?

Firstly what is the different between mental capacity and vulnerability?  Mental capacity relates to a person’s ability to make a decision, so if a person lacks the requisite mental capacity to make a decision they are legally unable to make that decision.  The concept of vulnerability is much broader.  Vulnerability can arise due to a wide variety of factors such as age, disability or lack of understanding of English.  Vulnerability does not necessarily mean that a person will need tailored support.  Their circumstances may not warrant it.  However vulnerability should act as a sign post to legal advisors to consider the nature of the vulnerability.  If a vulnerable person is considered to be at risk, the legal advisor should consider the extent to which tailored support is needed.  It is important to acknowledge that just because a person is vulnerable does not mean that they also lack mental capacity.  However a person who lacks mental capacity is likely to be vulnerable.  We are often instructed to advise on what I would categorise as self-contained mental capacity related matters.  This is where the overriding issue at the heart of the matter is the state of someone’s mental capacity and the mechanism in place for dealing with it.  For example, we might advise on the appointment of a Deputy or Attorney or we might advise on contentious matters surrounding such appointments.  As a starting point for these matters, a person’s mental capacity is generally dealt with first and foremost.  It may be that the subject matter of a dispute is the level of someone’s capacity in itself but the point is it is being continually addressed by the very nature of the matter in itself.  However mental capacity issues crop up all the time where the subject matter of the legal advice does not relate to mental capacity and yet dealing with a capacity issue may be a pre-requisite to continuing to advise.  Here I am talking about the bipolar client who temporarily loses capacity whilst dealing with matrimonial proceedings or the shareholder with capacity that fluctuates due to medication and who may have the requisite levels of capacity to deal with straight forward decisions arising out of their shareholding but may not have capacity to manage their investment over the longer term.  It is in relation to these matters where fluctuating levels of capacity can cause particular issues.  This is because clients often have the requisite level of capacity to make some decisions but perhaps not all decisions.  The issues arising from this are only exacerbated if the level of capacity fluctuates on a day-to-day basis.  We will discuss these issues shortly but we will now look at the law in relation to mental capacity. 

The question of mental capacity is always specific to the issue at hand.  There is no one threshold of capacity beyond which a person would be deemed to have insufficient capacity, this is not how the law works.  Rather the requisite level of capacity fluctuates according to the complexity of a particular decision.  This is true of both the common law and the statute capacity tests.  However before we consider the mental capacity tests we will first look at the Mental Capacity Act 2005 which I will refer to as the Mental Capacity Act.

The Mental Capacity Act provides a functional test to assess mental capacity and sets out the framework for assessing mental capacity.  However the Mental Capacity Act deals with far more than just providing the framework to assess mental capacity.  I now hand over to Bethan who will look further at the Mental Capacity Act.

Bethan Byrne
The Mental Capacity Act is often overlooked particularly where the applicable mental capacity test is a common law test rather than a statute test.  In relation to issues of mental capacity the Mental Capacity Act should always be considered.  For this reason it is worth mentioning some of the core principles of Mental Capacity Act.  The first core principle of the Mental Capacity Act is that a person must be assumed to have capacity unless it is established that they lack capacity.  The presumption I that in general people are able to make decisions for themselves.  The second core principle under the Mental Capacity Act is that a person is not to be treated as unable to make a decision unless all practicable steps to help him to do so have been taken without success.  The Mental Capacity Act is an enabling Act.  It promotes and encourages the individual concerned to participate in the decision making process as much as they are able to do so.  This could mean that the professional advisor will need to create the right environment to enable someone to be able to make a decision with the requisite level of capacity or it could mean that if a decision is being taken on behalf of a person who lacks capacity that the design maker enables the participation of the incapacitous person in the decision making as much as they are able to do so.  I will now turn to the functional test for assessing mental capacity under the Mental Capacity Act.  In general the statute, Mental Capacity Act test is the default test for assessing mental capacity unless case law has stipulated otherwise.  It sets out, and I quote ‘a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of or disturbance of the mind or brain’, it continues, ‘a person is unable to make a decision for himself if he is unable to do four things; firstly to understand the information relevant to the decision; secondly to retain that information; thirdly to use of weigh that information as part of the process of making the decision or fourthly, to communicate his decision whether by talking, using sign language or any other means’.  I will not discuss the further elements of the functional test.  Looked at in isolation they can be fairly dry.  It is worth noting that the Mental Capacity Act does anticipate that the test will be applied to individuals with fluctuating capacity to allow them to make decisions during lucid intervals.  Whilst the functional test requires an individual to retain that relevant information, the Mental Capacity Act makes further provision that the fact a person is able to retain the information relevant to the decision for a short period of time does not prevent him from being regarded as being able to make a decision.  The default test for assessing mental capacity should always be the functional test under the Mental Capacity Act.  However, in certain circumstances the applicable capacity test is the common law, for example, the common law test for testamentary capacity.  The test of whether a testator has capacity to make a Will remains that set out in Banks v Goodfellow where it was said that a testator must understand the nature of making a Will and its effects, understand the extent of the property of which he is disposing and be able to comprehend and appreciate the claims to which he ought to he ought to give effect.  For this last purpose the testator must suffer from no disorder of the mind which poisons his affections, perverts his sense of right or prevents the exercise of his natural faculties, that no insane delusion influences his Will and disposing of his property.  Molly will now address some of the issues that arise in relation to the difference between the common law test for testamentary capacity and the statute test.

Molly Hunter
Thank you Bethan.  Recent decisions have held that the Mental Capacity Act does not affect the existing case law in so far as it relates to the mental capacity test for Wills.  In the ongoing case of Clitheroe and Bond, one of the grounds on which permission to appeal was granted included the contention that the proper test for testamentary capacity is that under the Mental Capacity Act where the presumption of capacity rather than pursuant to the test of Banks and Goodfellow which transfers the burden of proving capacity to the person who claims the Will is valid if a real doubt is raised.  In Clitheroe and Bond the High Court has again confirmed that the correct test to apply is the test set out in Banks and Goodfellow.  However the Law Commission is reviewing the law on Wills and has provisionally proposed replacing the common law test with the statutory test contained in the Mental Capacity Act.  As yet there is no legislative proposal.  Nevertheless if the correct test be applied for testamentary capacity becomes the statutory test set out in the Mental Capacity Act, the capacity threshold to make a Will will increase.  The Mental Capacity Act requires a higher level of capacity to make a Will because it requires that the testator understands the information relevant to making a decision and the reasonably foreseeable consequences of a decision.  The latter requirement to understand the reasonably foreseeable consequences assumes a higher test.  Where there is doubt in respect of whether a person has the requisite level of capacity to make a Will, clarity can be sought from the Court of Protection.  However given that the Court of Protection is able to apply the test under the Mental Capacity Act the Court may deny a person the ability to make their own Will on the basis that they do not meet the Mental Capacity Act threshold test that they would have made in the Banks and Goodfellow threshold.  The difference in the thresholds of the two tests has the potential to be prejudicial.  For practical purposes at present when drafting a Will the functional approach set out in the Mental Capacity Act should be followed but the common law test should provide the requisite threshold test.  In the final part of this podcast, I will discuss some of the issues arising in relation to a client’s capacity to instruct.  I will also flag some of the pitfalls to watch out for in respect of a client with fluctuating levels of capacity.  Practically speaking the capacity test becomes actively relevant in respect of decisions where capacity is an issue.  Capacity will always be an issue that will need to be addressed even where a client has capacity but where certain circumstances would ring alarm bells. Perhaps a client may have lost capacity in the past or may have fluctuating or deteriorating levels of capacity.  Take for example, an individual with high but fluctuating levels of capacity and that individual needs to make decisions of various levels of complexity.  If the functional test under the Mental Capacity Act is applied it is likely that different conclusions will be drawn in respect of whether that individual has the requisite capacity to make each decision.  If the tests were to be repeated a different day, given the fluctuating levels of the capacity the results may differ.  Where you have a client who falls into this category it is vital that certain steps are taken to make sure that the client is protected.  At the very outset consideration should be given in relation to whether a client actually has capacity to instruct.  The threshold level in respect of capacity to instruct is in itself relatively low however if you have a client who has fluctuating levels of capacity close attention should be paid to the nature of the instruction.  What is it that you are being asked to do?  Is it straight forward or complicated?  Is it straight forward but the instructions will need to be given over an extended period of time which actually may make it more complicated?  Is it straight forward but high value which again may make it more complicated.  By way of example, take client A who is a longstanding client of the firm.  The firm is aware that client A has dementia and may lack capacity to make certain decisions.  Client A approaches the firm with two new instructions; the first instruction is to put in place a Deed of Gift in relation to a small sum she’s just gifted her daughter; the second instruction is to restructure her high value property portfolio which will require input from multiple teams across the firm.  Client A is likely to have capacity in relation to the first instruction but in relation to the second she may not have the requisite capacity to make decisions at this level of complexity where a grasp of the issues is needed over an extended period of time.  How should this be addressed?  What should be put in place?  Take the more complex example of client B who has bipolar.  Occasionally client B has a breakdown where he is required to be sectioned under the Mental Health Act.  Between these infrequent episodes the client is able to function normally, hold down a high powered job and has the requisite levels of capacity to deal with an acrimonious divorce from his wife.  How should his circumstances be addressed?  What should be put in place?  In relation to both of these examples the legal advisor should consider appropriate measures in order to protect the client to ensure that any steps taken by or on behalf of the client are not void or voidable under common law.  At the outset of any matter where capacity is an issue, consideration should be given in relation to whether it would be appropriate to organise a capacity assessment.  This is where a trained professional who often has a medical background carries out a mental capacity assessment.  Of course the capacity assessment may not be needed however if it is needed it is normal for a capacity assessment to have a specific focus so the assessor will need to be sophisticated enough to be able to tailor the capacity assessment appropriately and apply the correct functional capacity test outlined earlier.  Of course a client may be reluctant to take a capacity assessment if they consider that they have the requisite levels of capacity.  This should be dealt with sensitively. Ultimately the assessment will be incredibly valuable and will protect the client from any challenge relating to their capacity.  Once a capacity assessment has been carried out the legal advisor should also be considering whether further checks are needed in relation to a client’s capacity during the course of the matter.  The legal advisor should consider what for these checks should take and how frequently they should be.  Like with the example given of client A in relation to the instruction to produce a Deed of Gift the issue does not end there.  Steps will still need to be taken for the purpose of the client file to demonstrate the client’s level of capacity has been appropriately considered and addressed.  If it transpires that a client does lack capacity in relation to a particular instruction or where it is possible that they may lose capacity during the course of the matter, can and should Lasting Powers of Attorney both in relation to property and financial affairs and in relation to health and welfare, be put in place?  Obviously it will need to be ascertained that the client has the requisite level of capacity to make the Lasting Powers of Attorney.  Also making Lasting Powers of Attorney does not necessarily mean that they will be needed but if during the course of a matter it is found that a client has lost capacity it would be a very different story if there were no Powers of Attorney in place.  Instead a Deputyship application to the Court of Protection is likely to be required.  Given the current delays in relation to an application to appoint a Deputy, this should be a last resort.  If a client’s level of capacity is such that it would be questioned on a day-to-day basis a legal advisor should consider whether the attorney acts as agent on behalf of the donor of the power at the outset.  By way of example, take client C.  Client C is a talented artist and she is extremely wealthy, however she is required to take strong medication due to her epilepsy.  Whilst client C is able to live by herself, work, travel, have relationships, go on holiday and carry out day-to-day tasks such as shopping, her medication affects her ability to concentrate and she struggles to manage her considerable wealth.  Client C has a property and financial affairs Lasting Power of Attorney in place and therefore her Attorney is able to instruct the firm on her behalf.  The attorney would have a duty to consult client C as the donor of the Power and client C should be included in the matters as much as possible.  However taking instructions from the appointed Attorney will protect client C not only from making a decision that she would not have otherwise made if she had the requisite level of capacity to manage her property and financial affairs but even if she would have made the same decision as her Attorney have appropriate measures in place will also protect client C from the possibility of a challenge in relation to the steps taken.  Dealing with a client’s fluctuating level of capacity becomes that much more complicated where litigation is involved.  As with all decisions, the level of capacity required will be determined by the complexity of the litigation.  The Mental Capacity Act test is applicable here.  A person may have the capacity to litigate a simple dispute but not a complex one.  Further whilst a person may have subject matter capacity to make specific decisions during the course of the litigation, they may still lack capacity to litigate.  Where a person lacks capacity to litigate a Litigation Friend must be appointed to act on their behalf.  The procedure for appointing a Litigation Friend is Court specific.  In an upcoming podcast in this series we will look at how to support and protect clients in litigation.  It will cover the steps that need to be taken where a client lacks capacity to litigate including the procedure for the appointment of a Litigation Friend.  Back to you Bethan.

Bethan Byrne
So as will be apparent from this podcast, there is no one size fits all on the issue of capacity.  Questions over capacity are complex and require careful consideration and an understanding of the applicable legal tests and how they are applied in order to protect both the client and the validity of the instructions they provide.  Finally, it is worth mentioning that the Court of Protection which was established by the Mental Capacity Act 2005 has wide ranging powers to deal with matters relating to capacity.  However the High Court has retained inherent jurisdiction to ensure that where matters fall outside of the Court of Protection’s jurisdiction a vulnerable person can still be protected.

Molly Hunter 
For now let’s wrap up there.  I’d like to say thank you to Bethan Byrne for joining me for this Mishcon Academy Digital Sessions podcast. I am Molly Hunter and in an upcoming episode we continue our focus on vulnerable clients and mental capacity, looking at vulnerability, coercive control and undue influence.

The Digital Sessions are a series of online events, videos and podcasts all available at mishcon.com and if you have any questions you’d like answered or suggestions of what you would like us to cover, do let us know at digitalsessions@mishcon.com. Until next time, take care.

The Mishcon Academy Digital Sessions. To access advice for businesses that is regularly updated, please visit Mishcon.com.

In this first Mishcon Academy Digital Sessions podcast on vulnerable clients and mental capacity, Molly Hunter and Bethan Byrne provide an introduction to mental capacity and the applicable law, exploring the issues to be aware of in relation to mental capacity and vulnerability and how best to support clients with fluctuating mental capacity. They look at three different case studies to give context and bring to life the reality of mental capacity and vulnerability.


Visit the Mishcon Academy for more learning, events, videos, podcasts and reports.

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