Financial Abuse Protection Powers pre Care Act

In a society where vulnerable people can be persistently exploited and everyone is expected to pay for what they need, the law has to provide mechanisms to protect against financial abuse, albeit through intervention in the lives of those for whom the protection is intended. To this end there are statutory and common law provisions of relevance to those for whom mental impairment, brain injury, or mental illness, has negated what would otherwise be a presumption of capacity to manage their money or property.

Common law

Mentally incapacitated people are protected from the consequences of the contracts that they might otherwise seek to make, by the principle that such contracts are voidable and cannot be enforced against them if the other party knew or ought to have known that the person was mentally incapacitated at the time of the so called contract. If this is so (and it will be where severely learning disabled people are placed in so-called independent sector tenancies with housing associations who know about the person’s incapacity) then the contract is voidable at the incapacitated person’s option. The understanding required to uphold the validity of a contract depends on the nature of the transaction.

However, that would mean no-one would ever want to provide anyone with a mental impairment, injury or disability, anything which costs money, so the law also states that contracts for necessaries may be given effect even though the person was known to be incapacitated. Section 3 of the Sale of Goods Act 1979 provides that if necessaries are sold and delivered to a person who by reason of mental incapacity is incompetent to contract, he must pay a reasonable price for them. Necessaries are goods (it is unclear whether they can be services) suitable to the person’s condition in life and to his actual requirements at the time. This gives the seller a right to payment in respect of the value of the item.

Even assuming necessaries comprise services as well as goods, all those providers who cater for the needs of social care clients through Supported Living services or services paid for out of a Direct Payment would need to rely on this doctrine for enforcement of payment. This is why many providers prefer to have a contract with the local authority, instead of the individual client.


Statute law also provides other means for lawful taking over of responsibility for others’ affairs.


The Court of Protection has power under the Mental Health Act in respect of and over people who by reason of mental disorder are incapable of managing and administering their property and affairs.

For these purposes, the definition of mental disorder is the one in s1 Mental Health Act and means mental illness, arrested or incomplete development of mind, psychopathic disorder and any other disorder or disability of mind. This plainly means that Alzheimer’s disease and learning disability can count for these purposes even though they are not regarded as treatable, and one does not have to be thought ‘seriously irresponsible’ with money to count.

The medical evidence required for such an order must be from one registered medical practitioner. The judge of the court has powers over the property and affairs of a patient. The judge may do or secure the doing of all such things as appear necessary or expedient for the maintenance or other benefit of the patient, or other members of the patient’s family, and otherwise administering the patient’s affairs. The judge must have regard to the patient’s creditors’ interests even though the patient’s contracts may not be legally binding, because of their mental incapacity.

Although the Court has power over all the property and all the affairs of the patient, that does not mean it can make decisions about the management or care of the patient’s person. Thus the Court cannot decide that someone should leave their home and move to a residential care home – that is dealing neither with property or financial affairs, although it obviously costs money once the decision has been made. All the Court is allowed to do is to take welfare considerations into account in coming to decisions about property and financial affairs.

One of the things most often done by the court is to appoint a Receiver for the patient, and that might be the finance director of a social services authority, although there is no obligation on social services to apply for Receivership. The patient’s Nearest or other relative, a doctor, a solicitor, a social worker or a friend can also apply to be a Receiver. The Official Solicitor can even be asked to apply, and the Court can direct one of its own officers to apply.

This person has power to do all the things with the property or affairs of the person as the Judge orders, but can also be given a wide discretion as to how to deal with things. But the Receiver, while appointed, only has power to do what the court’s Judge could him or herself do, so is also restricted to decision-making about property and financial matters, not welfare decisions.

This is why it is not right to treat a Receiver as having a power of veto or consent to proposals about the client’s welfare/daily living arrangements.

Under the rules, the Court can be asked to remit or postpone the payment of the normal Court of Protection fees in cases of hardship.

If the Patient becomes able again to manager and administer his property and affairs, the Receivership may be discharged by the Judge. There is no automatic review as to whether the court’s continued intervention is required. If a patient recovers capacity he or she can write to the court making the request and giving the name of a doctor who will support the application with medical evidence of recovery.

Objectors to the Receivership can apply to the Court of Protection if they have evidence which they say should lead to the discharge of the Receiver for misconduct.



Where a person has little capital and receives income only from state benefits, it is not worth getting the Court of Protection involved and arrangements can be made under the Social Security (Claims and Payments) Regulations 1987 for the appointment of a person to act on behalf of the claimant. An appointment can be made where a person is or alleged to be entitled to benefit (whether or not a claim has been made by him or on his behalf) and the person is ‘unable for the time being to act’, and no receiver has been appointed by the Court of Protection.

Mental incapacity therefore provides grounds for an appointment, but there might also be physical reasons making the client unable to act. In that latter situation the physically indisposed person can informally appoint someone as their agent, but once a person has lost mental capacity, the appointment has to be under legislative auspices, and this is what appointeeship is for.

A Social Services worker may be an appointee, but the Department of Social Security does not favour it. If there is no-one else to act, of course, the Care Manager or Finance department is better than no-one.

Very often, residential care home proprietors take on the role because it guarantees them control over the funds out of which a large proportion of their fees will be paid but this is now thought to be inappropriate in principle. No medical evidence in support of the application is required, although it is being asked for more now than in the past.

The appointee has power to exercise any rights and duties that the claimant has under the Social Security Acts and Regulations, and

receive any benefits payable to the claimant

and deal with the money received on the claimant’s behalf in the interests of the claimant and his dependants.

The institution of formal Receivership brings an appointee’s role automatically to an end, as it does to that of the holder of an enduring power of attorney, below. This is a useful reserve power to exercise if financial abuse of a vulnerable person by their current financial representative is suspected.

An appointee’s role can also be revoked by the Secretary of State at any time, so if there is evidence of abuse, there are steps that can and should be taken to protect the person concerned.



This is an appointment made by a person who still enjoys sufficient mental capacity to know what they are doing in law, to abide the time when they no longer have it. The donee of the power can make legally binding decisions on their behalf even once capacity has been lost.

It is cheaper than the regime run by the Court of Protection and there is no delay whilst authority is sought, once capacity is lost.

Once again, as with receivership, the ambit of the power is restricted to the disposition of assets, not the welfare decision-making role. The attorney has the right to act for the benefit of him or herself or persons other than the giver of the power, to the extent that the donor might have been expected to so provide. This power includes the giving of reasonably-sized gifts to people.

A mentally capacitated person who wishes to put his affairs in the hands of a friend, relative or adviser may grant them a power of attorney, which enables the receiver to make legally binding decisions on their behalf. There is a formal, prescribed document for this, and the giver can choose whether to give a general power, or a restricted or conditional power. There are two types of a power of attorney:

An ordinary power of attorney works while the person who gave it still has mental capacity but is away or abroad or otherwise physically incapable of signing papers etc. On the giver’s deterioration of capacity, ordinary powers of attorney cease to work. They are automatically revoked. The scope of such powers however, during the person’s capacity, is wide, and covers personal and medical matters, as well as property affairs. This is of no use to carers or local authorities, once the person giving the power has become mentally incapable.

The second type is called an Enduring Power of Attorney and it enables a capacitated person to appoint an attorney whose legal authority survives the giver’s subsequent metal incapacity. Thus where people have made these plans in advance, there is no need to go to the Court of Protection to be appointed anyone’s Receiver. But the powers only extend over property and affairs, not personal or medical matters.

When the giver becomes incapable, the recipient attorney can only use the powers if they have applied to the Court of Protection for the instrument giving the powers to be registered, giving notice of the intention to do so to specified relatives and the giver him or herself, so they can object if they want to.

The Act does not require medical evidence for the initial grant of the power: it assumes legal capacity on the part of the giver at the time of the initial signature. Many grants are registered suspiciously soon after they were signed, suggesting that solicitors do not always act with the highest degrees of probity or ethics, when accepting instructions from a person to create a power of attorney.

Where a document creating an enduring power of attorney has been registered, the Court must cancel that registration if satisfied that fraud or undue pressure was used to induce the giver to create the power, or that, having regard to all the circumstances and in particular the attorney’s relationship to or in connection with the donor, the attorney is unsuitable to be the donor’s attorney. Anyone has the right to apply by letter for cancellation of the power.

Powers can be revoked if the Court of Protection is satisfied that fraud or undue pressure induced the creation of the power, or if the attorney is unsuitable to be the donor’s attorney. Powers can be cancelled on the application under the Court of Protection Rules 1994. There is no reason why the Chief Finance Officer could not take a power of attorney whilst someone still has capacity to grant one.



Whilst people are of full mental capacity they can appoint an agent to do things for them and stand in their shoes, and the world has to accept that, unless someone such as a bank, for instance, has indicated in advance that they will not deal with agents. Thus people can be authorised to collect people’s pension books, and contract on their behalf if they cannot sign something. However, it is important to appreciate that when someone loses mental capacity, the law does not allow the agent to go on acting, because it would be too risky in terms of potential for abuse.

Even though that is the law, though, it very often happens that the incapacity of someone comes on slowly, so those people who have been used to dealing with the person’s authorised agent, would have no reason to suspect that the person had lost further capacity, unless the agent is honest and explains that formal steps will have to be taken to the Court of Protection, before he or she can be regarded as having legal authority to act, any longer. That is why it is better to use an enduring power of attorney just in case – apart from registration, no further formality is required and the power continues to exist, after the givers’ incapacity.


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