8 July, 2016
Singapore passed its Mental Capacity Act (“MCA”) in 2008. The MCA introduced a fundamental change in that it allowed a person whilst mentally capable (known as the “donor”), to decide and appoint a person (the “donee”) to make a decision on his behalf in the event that the donor should lose his mental capacity. This is done through the execution of a Lasting Power of Attorney (“LPA”) and registering the LPA with the Office of the Public Guardian (“OPG”). The MCA further retained the mechanism for deputies to be appointed by the court to make decisions for persons who have lost their mental capacity (“P”) and have not executed any LPA. Such applications are in practice, typically made by a relative of the person who has lost his mental capacity.
On 14 March 2016, Parliament finessed the MCA further, taking into account the feedback and experiences in the eight years that the MCA was in force, and passed the Mental Capacity (Amendment) Bill. The Amendment will come into effect on a date to be notified by the Minister in the Gazette.
The Amendments aim to:
- better prepare Singapore for a future where there will be a need for professional donees and deputies to help those who do not have family or close friends to be their proxy decision makers;
- better protect individuals who lack mental capacity from being abused or exploited by their
- donees or deputies;
- improve commercial certainty in the use of LPAs in transactions with third parties for the benefit
- of the donor; and
- improve the operations of the Public Guardian’s office.
Future Need for Professional Donees and Deputies
As was observed by Mr Tan Chuan-Jin, the Minister for Social and Family Development, when the bill was read for a second time in Parliament, a large majority of donees and deputies are family members. There is a concern that there will be a small but increasing number of elderly singles or childless elderly couples who may not have family members or close friends to rely on to be their donees or deputies. The amendments introduce “professional donees” and “professional deputies” to address this concern.
The introduction of professional donees and professional deputies is also apt and timely given the increasing number of high net worth individuals who have chosen to use Singapore as their investment base or even to make Singapore their home. For such individuals, their property and affairs may be more complex and intricate and tend to be managed by professionals (be they investment advisors or bankers). In such instances, it may be in the interest of such an individual for his assets to continue to be managed by a professional donee or professional deputy with the appropriate expertise, in the event that he should lose his mental capacity.
A professional deputy is a person who provides deputyship services for remuneration and he must not be related to the person for whom he is appointed as deputy. It is envisaged that professional deputies are likely to include licensed trust companies, and professionals such as lawyers and accountants. The Amendment also creates a registration framework for professional deputies – they have to be registered with the Public Guardian.
A professional donee is likewise a person who provides doneeship services for remuneration and he must not be related to the person for whom he is appointed as donee. As donees are appointed by the individual when he still has mental capacity (unlike deputies who are appointed by the court after the person has lost his mental capacity), there is no registration regime for donees. A professional donee can be a professional deputy or from a class of persons prescribed as qualified to be a professional donee, namely licensed trust companies, and professionals such as lawyers and accountants.
The types of decisions which a donee or a deputy can make for P under the MCA fall into two categories – those relating to P’s property and affairs, and those relating to P’s personal welfare. Whilst individuals can be appointed as donees or deputies in respect of both P’s property and affairs as well as P’s personal affairs, a company can only be appointed as a donee or deputy in respect of P’s property and affairs.
The Amendment does not set out the criteria and qualifications to be met for a person to be appointed as a professional donee or a professional trustee, the Minister in his speech in Parliament emphasised that “the regulatory framework must ensure that a professional donee or deputy is competent, of suitable character, and is accountable to the relevant authorities for what he does.” He further elaborated that the person must be of sound financial standing, must not have a criminal record, should not have any disciplinary action taken against him if he belongs to a professional body, have sufficient experience as a deputy or a related field. It is likely that the OPG will in due course, publish codes of practices or standards, similar to the Office of the Public Guardian professional deputy standards published by the OPG of UK.
Protection from Abuse by Donees or Deputies
The case involving Mdm Chung and her former tour guide Yang Yin illustrated the vulnerability of a person without mental capacity and her reliance on the person appointed as her donee or deputy. It is with this experience that the MCA was amended to allow preemptive action to be taken, and to better protect the individuals who lack mental capacity from abuse.
First, the Amendment extended the circumstances under which the court may revoke a donee’s or deputy’s powers. Previously, the court could do so where the donee or deputy has behaved or proposes to behave in a way that would contravene the authority conferred on him or is not in P’s interest. The court may now additionally revoke a donee’s or deputy’s powers where the donee or deputy is convicted of an offence of criminal misappropriation, criminal breach of trust, cheating, theft or extortion or any offence involving fraud or dishonesty, whether as against P or another person.
Second, the Amendment also introduced a new section 36A, under which the court may suspend a donee’s or deputy’s powers, even when there is no application made to the court to revoke the donee’s or deputy’s appointment as such. The circumstances under which the court may act includes:
- where the donee or deputy has only been charged (and not convicted) of an offence of criminal misappropriation, criminal breach of trust, cheating, theft or extortion or any offence involving fraud or dishonesty, whether as against P or another person;
- where the donee or deputy engages, proposes to engage or has engaged in conduct which affects the suitability of the donee or deputy to act as such or compromises P’s interest; and
- where there is a risk of dissipation of P’s property by the donee or deputy if the order of suspension is not made.
Commercial Certainty
Whilst these amendments protect the interests of the individual who does not have capacity, they do give rise to the issue as to commercial certainty for third parties dealing with donees and deputies, in particular, banks and financial institutions. How are these third parties to be assured that the powers of the donee or deputy as evidenced in the Order of Court or LPA presented to them, have not been revoked or suspended?
The position in respect of dealing with donees and with deputies can be different.
The newly amended section 16 of the MCA provides that a third party who deals or transacts in good faith with the donee, without knowing of the revocation or suspension of the LPA, is entitled to rely on the LPA. It should be noted that knowledge is not limited to knowledge of the revocation or suspension of the LPA but includes knowledge of the happening of any event which has the effect of revoking or suspending the LPA.
Section 16(4) further provides a useful presumption for third parties dealing with donees. Such transaction by third parties with donees are conclusively presumed to be valid ether if the dealing was completed within 12 months of the registration of the LPA or if the third party makes a statutory declaration within three months of the completion of the transaction that the third party has no reason at the time of dealing or transaction to doubt the donee’s authority to deal or transact.
There is no similar provision relating to third parties who deal with a deputy.
Parties dealing with donees and deputies will be well advised to conduct the relevant searches on the OPG website and in court, as to the validity of the LPA or Order of Court respectively.
Improve Operations of the Office of Public Guardian
In addition to the introduction of an Assistant Public Guardian to deal with the sharp rise in the volume of LPAs registered with the OPG, the Amendment also allowed the Public Guardian to appoint an auditor to assist the Public Guardian in examining the donee’s and deputies’ reports or any information obtained by them in the exercise of their investigative functions.
To a great extent, the introduction of professional donees and professional deputies is a natural progression. Whilst family members will always be the first port of call for appointment as donees and deputies, the availability of such professional donees and professional deputies will clearly meet the needs of those who are single or childless, high net worth individuals whose affairs will require more care and expertise than a family member can or is willing to provide, or in instances where there are disputes between family members as to the person to be appointed as donee or deputy.
It is also hoped that the introduction of professional donees and professional deputies will raise the standards of the care and work to be carried out by donees and deputies, to the benefit of the vulnerable individual.
For further information, please contact:
Bock Eng Sim, Partner, WongPartnership
bockeng.sim@wongpartnership.com
