SHERIFFDOM OF GRAMPIAN HIGHLAND AND ISLANDS AT STONEHAVEN

AW8/08

JUDGEMENT of SHERIFF PRINCIPAL SIR STEPHEN S T YOUNG Bt QC in minute for renewal of guardianship by MISS CAROL ANN COOPER Appellant

Act: Mr John Stott, solicitor, Esslemont Cameron Gauld, Aberdeen

Stonehaven: 23^rd April 2009

The sheriff principal, having resumed consideration of the cause, refuses the appeal and adheres to the interlocutor of the sheriff dated 16 October 2008 subject to the deletion of the words "in the sum of ONE HUNDRED AND SEVENTY TWO THOUSAND POUNDS STERLING [£172,000]" and the substitution therefor of the words "in a sum equal to 100% of the value of the Adult's estate"; quoad ultra remits the cause to the sheriff to proceed as accords.

Note

[1] In this case the appellant, who is a solicitor, was appointed curator bonis of the adult by interlocutor of the Court of Session dated 21 June 2000 and, according to article 1 of the condescendence, she has continued under this appointment, firstly as a curator bonis and subsequently as financial guardian, since that date. It is said that she has had experience in dealing with the financial affairs of the elderly and has previously been appointed to act as financial guardian on behalf of a number of individuals. In article 2 it is said that the adult, who was born on 10 May 1945, is severely mentally and physically disabled and has been since birth, that she is unable to talk or communicate in any way, that she is physically wholly dependent on the assistance of carers for all her requirements and that, as a result of her condition, she is unable to manage her affairs or to give directions therefor and will continue to be so incapable for the remainder of her life. These last averments are borne out by the terms of a report from a medical practitioner which has been lodged in process.

[2] On 16 September 2008 the appellant lodged a minute with the sheriff clerk in which she craved the court to grant a renewal of the guardianship order under section 60 of the Adults with Incapacity (Scotland) Act 2000. By interlocutor dated 16 October 2008 the sheriff, having heard the appellant's solicitor, granted an order renewing her appointment as guardian for an indefinite period with a variety of functions and duties, all on finding caution in the sum of £172,000 to the satisfaction of the Public Guardian. The appellant has now appealed to myself against the requirement that she should find caution.

[3] Section 1 of the Act provides, inter alia:

(1) The principles set out in subsections (2) to (4) shall be given effect to in relation to any intervention in the affairs of an adult under or in pursuance of this Act, including any order made in or for the purpose of any proceedings under this Act for or in connection with an adult.

(2) There shall be no intervention in the affairs of an adult unless the person responsible for authorising or effecting the intervention is satisfied that the intervention will benefit the adult and that such benefit cannot reasonably be achieved without the intervention.

(3) Where it is determined that an intervention as mentioned in subsection (1) is to be made, such intervention shall be the least restrictive option in relation to the freedom of the adult, consistent with the purpose of the intervention.

In terms of section 1(4) in determining if an intervention is to be made and, if so, what intervention is to be made, account shall be taken of, inter alia, the present and past wishes and feelings of the adult so far as they can be ascertained by any means of communication and the views of the nearest relative and various other parties. Section 60 provides, inter alia:

(1) At any time before the end of a period in respect of which a guardianship order has been made or renewed, an application may be made to the sheriff under this section by the guardian for the renewal of such order, and where such an application is so made, the order shall continue to have effect until the application is determined.

............

(4) Section 58 shall apply to an application under this section as it applies to an application under section 57.

In its original form section 58(6) provided that, in making a guardianship order relating to the property of financial affairs of the adult, the sheriff had to require an individual appointed as guardian to find caution except, in short, where he was unable to find caution. But this has been amended by section 60(2)(a) of the Adult Support and Protection (Scotland) Act 2007 and now provides:

(6) In making a guardianship order relating to the property or financial affairs of the adult the sheriff may require an individual appointed as guardian to find caution or to give such other security as the sheriff thinks fit.

[4] In paragraph 2 of the grounds of appeal it is said inter alia that, since the amendment of section 58(6):

......... certain sheriffs (in this sheriffdom) have been satisfied that when a solicitor is the applicant under the Act there is adequate protection by the fact that the solicitor is covered by professional indemnity insurance and the Solicitors' Guarantee Fund so that an adult's estate is adequately protected without the necessity of additional caution to be found ....... Other sheriffs have accepted that when a solicitor is applying for appointment or, as in this case, renewal, of appointment as a financial guardian, the need to find caution has been waived and (the sheriff) was aware at the time of making this order that this was the position. It is in the interests of justice that there should be an element of uniformity of practice within the sheriffdom and the sheriff principal is requested to make a determination in respect of the present case indicating the general principle upon which sheriffs in circumstances as outlined above should consider the waiving of need for finding caution, and, in particular, to dispense with the necessity to find caution in this case.

Then in paragraph 3 it is said:

In the present case, in the event of caution requiring to be found to cover the sum of £172,000 as ordered by the sheriff, the premiums at present which would require to be met from the adult's estate are £525 for the first eighteen months and £350 annually thereafter and on the basis of the continuation of the appointment of the applicant in this case continuing indefinitely, the necessity for this to be paid from the adult's estate will cause an unreasonable and unnecessary drain on the funds of the adult and, with there being adequate alternative provision by the fact that the applicant is a solicitor covered by professional indemnity insurance, it is unreasonable to require the estate of the adult to make this ongoing financial commitment.

[5] In response to the note of appeal to the sheriff wrote a characteristically helpful note explaining why he had ordered the appellant to find caution. This speaks for itself and it is unnecessary to set it out in full here. In short, he was evidently influenced by a variety of considerations. He emphasised that it would not occur to him to suppose that the appellant in this case would be dishonest. At the same time he recognised that this was always a possibility and he indicated that in the course of a long career in the law he had known solicitors whose honesty he would not have questioned who had turned out to be complete and utter rogues. He suggested in effect that the Guarantee Fund did not provide the protection required against this possibility and he drew attention to the fact that payments out of the Fund were discretionary and to the fact, as he understood the position (see paragraph 9 of his note), that a policy of professional indemnity insurance would cover only claims resulting from professional negligence, and not those resulting from dishonesty, on the part of a solicitor. In the final paragraph of his note he suggested that the Law Society of Scotland should perhaps be given an opportunity of being heard in relation to the appeal given, firstly, that it was unlikely that the court would ever hear full argument as to why caution should generally be ordered and, secondly, the possible implications for the Guarantee Fund were the view to be taken that financial guardians who were solicitors need not find caution.

[6] When I saw the papers in the case it appeared to me, in light of rule 3.16.8(5) of the Summary Applications and Appeals Rules 1999, that the application ought to have been intimated at the outset to the local authority. This had evidently not been done, albeit that intimation had been made to various other parties including two nieces of the adult. In this situation, and in light also of the final paragraph of the sheriff's note, I ordered intimation of the appeal to be made to the Public Guardian, the Law Society of Scotland and the local authority. This was duly done, but in the event none of these prospective parties appeared at the hearing of the appeal. On the other hand the Registrar of the Law Society of Scotland wrote two letters to the appellant's solicitor dated respectively 24 and 25 November 2008 in reference to the appeal and in addition the Deputy Director of the Financial Compliance Department of the Society wrote, again to the appellant's solicitor and in reference to the appeal, on 28 November 2008. The principals of these three letters were duly lodged in process. In the first of these letters the Registrar indicated that he had responsibility for matters relating to the Master Policy for Professional Indemnity Insurance at the Society and that the Society had decided not to seek representation in the appeal. He continued:

The Society through the office of the Convener to the Insurance Committee does wish to support your firm's appeal on the basis that it is not appropriate to order a guardian to find caution where the guardian is a solicitor covered by the Master Policy. The Master Policy will provide fidelity cover and Professional Indemnity Insurance cover up to £2M per claim with effect from 1 November 2008. Please note that the fidelity cover will only apply if there are two or more partners in the firm and at least one innocent partner in relation to any alleged dishonesty.

In the letter dated 25 November 2008 the Registrar enclosed an edited copy of a letter which had been exhibited to a sheriff at Hamilton who had apparently decided in light of it that it would not be appropriate to order caution to be found by the solicitor involved in the case before him. The copy letter includes the following two paragraphs:

I confirm that the Master Policy for Professional Indemnity Insurance covers all areas of business which are customarily but not necessarily undertaken by solicitors in Scotland. A financial guardianship is business which is customarily undertaken by a solicitor and therefore will be covered by both the Master Policy and Guarantee Fund (Compensation Fund). The Master Policy with effect from 1 November 2008 provides cover of up to £2M per claim. The Guarantee Fund provides unlimited cover where there has been dishonesty by a solicitor and there is another innocent solicitor in the practice. Both the Master Policy and Guarantee Fund only apply to solicitors in private practice.

There continues to be no requirement for a solicitor when taking out Master Policy cover each year to include in his proposal form that he may take up a financial guardianship.

In the letter dated 28 November 2008 the writer enclosed a copy of the minute of a meeting of the Guarantee Fund Committee of the Council of the Law Society of Scotland on 1 June 2006. In the second and third paragraphs of her letter she wrote:

In principle, the Guarantee Fund will meet claims in relation to a loss occasioned as a result of the dishonesty of a solicitor where he was acting in the course of his practice as a solicitor. Although the Fund is discretionary, such circumstances are likely to result in a grant being awarded when no other source of recompense is available. If, however, it is shown that the appointment was in a personal capacity, the Guarantee Fund would have no power to make any recompense.

Where all other avenues by way of Master Policy Insurance cover have been exhausted, the Guarantee Fund may fall to issue a grant for the outstanding balance. It would, however, only do so after all other sources of recovery have been exhausted.

The enclosed minute included the following paragraphs:

The Committee also considered that difficulties might arise on the retirement of a solicitor from practice. In circumstances where there is some dubiety as to whether or not a solicitor is acting in the course of his practice in relation to his power of attorney then there may be grounds for no payment to be made under the Guarantee Fund.

The Committee were also concerned that the true position of cover for firms was not known to those making the decisions in relation to caution.

The Master Policy of Insurance covers the partners of a solicitor for his dishonest activities. In these circumstances the Guarantee Fund will not come into operation and firms would have to pay the debt up to the self-insured limit. In circumstances where the solicitors were unable to pay, then only once the solicitors have all been sequestrated would the Guarantee Fund be able to pay the balance. A bond of caution provides more protection for a firm.

The Committee also noted that the fund is a discretionary one. In certain circumstances (the circumstances of a solicitor not acting in the course of his practice as suggested above) a decision may be made to pay only part of the claim or, indeed, none of it.

For the sake of completeness I should add that there was also lodged a copy of an interlocutor pronounced by one of the sheriffs at Aberdeen on 2 April 2008 in terms of which he had appointed the appellant to be guardian to another adult for an indefinite period and had dispensed with the need for the finding of caution.

[7] At the hearing of the appeal the appellant's solicitor submitted that it was inappropriate to order caution in a case such as this where the appellant was a solicitor who was covered by professional indemnity insurance. He explained that before 1 April 2008 caution had been mandatory although in practice before that date certain sheriffs had fixed caution at nil in view of the difficulties that some applicants had had in finding caution. The position now was that the question whether caution should be found was a matter for the discretion of the sheriff. Reference was made to the interlocutor of the sheriff at Aberdeen dated 2 April 2008 in which he had dispensed with the need for caution. The appellant in that case had been the same as the appellant in the present case and the argument that had been presented to the sheriff was the same as that which had been presented to the sheriff in this case, namely that where the appellant was a solicitor covered by professional indemnity insurance the assets of the adult would not be benefited by an order for caution and no additional security was required. It was explained that each year in November a practising solicitor had to apply to the Law Society of Scotland for a practising certificate for the following year and that this would not be issued by the Society unless there had been exhibited to it a certificate of professional indemnity insurance covering the following year while the practising certificate remained in force. In the present case the appellant did have a practising certificate and so was covered by the necessary insurance. In addition all solicitors were covered by the Solicitors' Guarantee Fund. Against this background, where a solicitor in a case such as this was ordered to find caution, there would effectively be double caution given that the solicitor had professional indemnity insurance cover and the full backing of the Guarantee Fund. The order to find caution therefore imposed an unnecessary expense on the adult's estate.

[8] Referring to the correspondence which had been produced from the Law Society of Scotland, the appellant's solicitor drew attention in particular to the letter dated 24 November 2008 in which reference was made to fidelity cover (which he confirmed meant cover against dishonesty). It was said in the letter that this cover would only apply if there were two or more partners in the firm and at least one innocent partner in relation to any alleged dishonesty. In the present case this was not of great significance since the appellant was one of four partners, albeit that there was plainly a slight risk here. To address this risk, the court in its interlocutor could dispense with the need to find caution so long as the appellant was a practising solicitor holding professional indemnity insurance including fidelity cover. If this were done, the Public Guardian could require to see evidence of the necessary insurance every year as a condition of the continuation of the appellant's appointment as guardian. In any event the Guarantee Fund might cover dishonesty on the part of the appellant if she were to withdrew from her current partnership.

[9] In conclusion, the appellant's solicitor submitted that the decision of the sheriff to order caution had been an unreasonable exercise of his discretion since it had imposed upon the affairs of the adult an unnecessary expense in light of the general principles to be found in section 1 of the Act and the requirement that due regard should be had to economy. Thus an annual premium of £350 was an unnecessary expense for this particular estate. In addition the sheriff had misapprehended a material fact in paragraph 9 of his note in suggesting that claims resulting from dishonesty would not be covered by a solicitor's professional indemnity insurance. In these circumstances the order to find caution should be recalled. Alternatively, the amount for which caution should be found should be restricted to the sum of £123,455 which was the current value of the adult's estate (namely £102,879 in stocks and shares and the balance in building society accounts and the like).

[10] In addition to the correspondence to which I have referred, the appellant's solicitor referred to two articles, one entitled: "A cautionary tale" by Alan Eccles (2008 SLT (News) 59) and the other entitled: "Caution for guardians and financial interveners" by David Nichols (Green's Family Law Bulletin - September 2008, Issue 95). I should add too that since the hearing of the appeal (and in response to questions which I had put to the appellant's solicitor) there have also been lodged in process copies of the appellant's current practising certificate and the certificate of insurance applicable to the firm of which she is a partner.

[11] It appears to me to be plain that the sheriff fell into error in paragraph 9 of his note where he said that his understanding was that, under a professional indemnity insurance policy, only claims resulting from professional negligence would be covered and that claims resulting from an insured's dishonesty would not be covered. This is a matter of some significance given the sheriff's earlier observations in his note about the honesty or otherwise of solicitors and his evident (and understandable) desire to protect the estate of the adult in this case against the possibility of dishonesty on the part of the appellant. One of the grounds upon which an appeal court may interfere with a decision of a court of first instance made in the exercise of a discretion is that the latter court has misunderstood the material facts before it (see Macphail's Sheriff Court Practice, 3rd Edn, at paragraph 18.111), and on this ground alone it follows that I am entitled to interfere with the decision of the sheriff and to treat the question whether or not the appellant should be ordered to find caution as being at large on appeal.

[12] So long as the appellant remains in partnership with her current partners I can see that the risk of the adult's estate being depleted in whole or in part on account of negligence or dishonesty on the part of the appellant is very low. But even in such a situation it appears to me that the risk cannot be eliminated altogether. For example, if two of her partners were to retire and she and the remaining partner together were thereafter dishonestly to realise the adult's estate and make off with the proceeds, it appears that the only recourse would be to the Solicitors' Guarantee Fund, payments out of which are discretionary at the best of times. No doubt the risk in this event would indeed be very low. But there would be a greater risk, as it appears to me, if the appellant herself were to resign from her current firm and set up in practice as a solicitor on her own account or alternatively retire altogether from practice as a solicitor and at the same time continue to administer the adult's estate. The magnitude of the risk in such a situation would clearly depend upon the likelihood of the appellant turning out to be dishonest. This is not something that I think the court can assess with any degree of accuracy, and in any event for present purposes the assumption I think has to be made that there will always be the possibility that the appellant would act dishonestly. Try as I may, I cannot see how the correspondence which has been produced from the Law Society of Scotland, the relevant excerpts from which I have quoted above, can be said to offer an unqualified assurance that in all circumstances the adult's estate would be protected against dishonesty on the part of the appellant (and here of course I am assuming at least that the cautioners would themselves remain able and willing to honour their obligations under a bond of caution). Like the sheriff, I do not suggest for one moment that I have any reason to suppose that the appellant would in fact turn out to be dishonest. But the possibility of this is always there, and so long as it is I think that the court ought in principle to take steps to protect the adult's estate against it, and that for this purpose only an order to find caution or give some other security under section 58(6) of the Act will offer the unqualified assurance that I believe is required in this situation.

[13] I used the words "in principle" in the last sentence of the preceding paragraph advisedly since the decision whether or not the court should make an order under section 58(6) in any given case will always be a discretionary decision made in light of the whole circumstances of the case before it. Thus I can envisage circumstances in which the court might take the view, for example, that the cost of securing an unqualified assurance of protection for the estate of an adult against the risk of dishonesty on the part of a financial guardian would be prohibitively high in relation to the extent of this risk and the value of the adult's estate. In such a situation the court might quite reasonably conclude in the exercise of its discretion under section 58(6) that it would not be appropriate to order caution to be found or some other security to be given.

[14] But this does not appear to me to be the situation in the present case. I have not been given any information about the income or outgoings of the adult's estate or how the cost of caring for her is currently being met. All I know is that the present value of the estate is of the order of £123,455 and that the amount of the annual premium which would require to be paid out of the estate in respect of a bond of caution would be equal to 0.2% or thereby of its value. Even if it has to be paid in whole or in part out of the capital of the adult's estate, this seems to me to be a small price to pay for the assurance which I think is required against the possibility of dishonesty on the part of the appellant and which I am not satisfied would be afforded in all circumstances by the appellant's professional indemnity insurance and the backing of the Guarantee Fund. I am persuaded therefore that it would be appropriate to order her to find caution under section 58(6).

[15] It will be recalled that in the course of his submissions the appellant's solicitor referred to section 1 of the Act. I am not altogether convinced that either the renewal of a guardianship order under section 60 or an order to find caution under section 58(6) do constitute an intervention in the affairs of an adult within the meaning of section 1. But, on the assumption that they do, I am quite satisfied that both of them, and in particular an order to find caution, will benefit the adult by affording to her estate the assurance of protection which I think is required against the possibility of dishonesty on the part of the appellant, that such benefit cannot reasonably be achieved without this intervention and that it is the least restrictive option in relation to the freedom of the adult, consistent with the purpose of the intervention.

[16] It will be recalled too that the appellant's solicitor suggested that the court in its interlocutor could dispense with the need to find caution so long as the appellant was a practising solicitor holding professional indemnity insurance including fidelity cover. I dare say that the Public Guardian could indeed apply to the court to have the appellant's appointment as financial guardian terminated in the event that she were to cease to be a practising solicitor holding professional indemnity insurance including fidelity cover. But, if she were minded to act dishonestly, I think that she would have little difficulty in realising the adult's estate and making off with the proceeds before the Public Guardian had had an opportunity to make such an application. So I do not think that framing the interlocutor in the manner suggested by the appellant's solicitor would achieve the desired result of protecting the adult's estate.

[17] I have already referred to the suggestion in the note of appeal that it would be in the interests of justice that there should be an element of uniformity of practice within the sheriffdom and that I should make a determination in respect of the present case indicating the general principle upon which sheriffs should consider dispensing with the necessity to find caution in a case such as this. I have indicated in paragraph [12] above what I think myself ought in principle to happen in a case such as this. But, so long as the court has a discretion under section 58(6), I do not think that it would be right that I should seek to establish this as a general principle which all the sheriffs in this sheriffdom should follow. However desirable it may be that there should be an element of uniformity of practice, I do not think that I can do anything towards securing this end in light of the current wording of section 58(6). If uniformity of practice is desired, then it seems to me that the law will have to be changed to achieve this.

[18] It will be seen that I have varied the interlocutor of the sheriff to the extent of deleting the reference to the appellant finding caution in the sum of £172,000 and substituting therefor a requirement that she should find caution in a sum equal to 100% of the value of the adult's estate. This I have done in pursuance of rule 3.16.10(1A) of the 1999 Rules which provides that the amount of caution specified by the sheriff may be calculated and expressed as a percentage of the value of the adult's estate. The possibility that I might do this was not canvassed during the hearing of the appeal. But my secretary has since advised the appellant's solicitor that I had this in mind and has indicated to him that I would be willing to hear him on the point if he wished to address me. He has indicated in response that he does not wish to do so.