Case Law Article: Court of Protection Rules on Fiduciary Duty and Conflict of Interest in Irwin Mitchell Trust Corporation v PW & Anor

Citation: [2024] EWCOP 16
Judgment on

Introduction

In the case of Irwin Mitchell Trust Corporation v PW & Anor: EWCOP [2024] EWCOP 16, Her Honour Judge Hilder presides over a Court of Protection matter involving the intersection of fiduciary duty and conflict of interest. The case focuses on whether the appointment of Irwin Mitchell Asset Management (IMAM) by the Irwin Mitchell Trust Corporation (IMTC) to manage the assets of an incapacitated person, PW, constitutes a conflict of interest breach. This article will dissect the legal principles, arguments presented, and the judgment to aid legal practitioners in apprehending the Court’s rationale and application of relevant legal standards.

Key Facts

The central issue arises from the IMTC’s (acting as a property and affairs deputy for PW) appointment of its linked entity, IMAM, to invest PW’s funds. The consideration is whether such an appointment violated rules against conflicts of interest.

Key facts include:

  • PW’s significant injury claim settlement.
  • The IMTC’s appointment as PW’s property and affairs deputy.
  • Participation of PW’s husband in the ‘beauty parade’ selection process where IMAM was chosen as the investment manager.
  • Vigorous application of processes by IMTC to mitigate conflict of interest potential.
  • Concerns raised about the appointment process and subsequent applications for ratification.

The case hinges on various established legal principles:

  1. Fiduciary Duty and Conflict of Interest: As a fiduciary, a deputy must act without any conflict between their interests and those of the person they represent—PW in this case. The judgment reaffirmed classic principles from Bray v Ford [1896] and Boardman v Phipps [1967], indicating that self-dealing rules prohibit fiduciaries from making a profit or placing themselves in conflicting interests unless expressly allowed.

  2. Best Interests under MCA 2005: Decisions around the management of assets for an incapacitated person must align with their best interests, following Section 4 of the Mental Capacity Act (MCA) 2005. This principle requires consideration of the individual’s welfare without the clouding of any external interests.

  3. Ratification Power of the Court: The Court of Protection holds the power to ratify an act that otherwise would constitute a breach of fiduciary duty, as prescribed by sections 15(c) and 19(4) of the MCA 2005.

  4. Authority and Oversight by the Public Guardian: Deputies are under the supervisory purview of the Public Guardian, affording a layer of protection and accountability in line with section 58(1)(c) of MCA 2005.

Outcomes

The Court concluded that:

  • The appointment of IMAM presented an actual conflict of interest.
  • IMTC’s assertion that the process was ratified based on historical practice and the judgment in Re MWS [2015] was incorrect.
  • IMTC’s processes, though robust, did not extinguish the theoretical conflict to an acceptable level as IMAM’s appointment was financially beneficial to the Irwin Mitchell group.
  • There was insufficient evidence to ascertain whether the continuation of IMAM services would align with PW’s best interests.
  • Consequently, no ratification for the appointment was granted at this juncture. However, IMTC was afforded the opportunity to reconsider its position or provide further evidence.

Conclusion

This case underscores the importance of fiduciary duty adherence and the meticulous assessment of conflicts of interest within the Court of Protection’s remit. Irrespective of internal processes designed to mitigate conflicts, financial benefits accruing directly to a deputy from a connected entity’s appointment will likely contravene fiduciary rules unless expressly mitigated or ratified by the Court. The judgment elucidates that fostering the best interests of the incapacitated cannot be superficially assured by internal protocols but must be intrinsically free from conflicts, with ratification from the Court as a required safeguard where conflicts unavoidably arise. Legal professionals must ensure unflinching compliance with these fiduciary duties and seek Court approval where conflicts are potentially present.