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At last – the defining of P’s assets!

During recent times, various professional deputies have encountered challenges when recovering their costs where P’s liquid assets are below £16,000, despite the fact P may own a property they reside in, which values their assets above the £16,000 mark.

There have been concerns with defining what is covered under P’s total assets, but as a result, professional deputies have been required to take fixed costs under the 4.5% rule.  This is in line with Practice Direction 19B, whereby it states;

“Where the net assets of P are below £16,000, the professional deputy for property and affairs may take an annual management fee not exceeding 4.5% of P’s net assets on the anniversary of the court order appointing the professional as deputy.”

The major concern has been the defining of net assets.  Under Practice Direction 19B, there is provision in respect of small estates, where the deputy may apply to the SCCO for a detailed assessment of costs.  However, the older and newer versions between 2011 to 2017 differ in the extent of information provided to aid interpretation of the term “net assets”.  The current version of Practice Direction 19B offers no explanation to the nature of assets to be considered, whereas the old version included a footnote, which provided some definition as follows;

“Net assets include any land or property owned by P except where that land or property is occupied by P or one of P’s dependents.”

This footnote is currently missing and has since been a confusing time for deputies to establish the extent of information to be provided to define the term “net assets”.  The effect has caused many deputies to take fixed costs under the 4.5% rule, even though the management of those cases has been complex and incurred considerable costs higher than the 4.5% rule allows.

Many approaches have been made with the Office of the Public Guardian (OPG) to see why this was removed, and whether this still applied.  The OPG did verbally state the rules did still apply and advised that the wording would be updated.  Unfortunately, this never happened.

Thankfully, recent guidance has been issued to set out the confusion and uncertainties caused by the Practice Directions from the old and recent versions.  The case of PennTrust Limited [2020] EW COP 48 was recently published following the judgment reached by Her Honour Judge Hilder, which clearly sets out the transparency of defining the term net assets. It was stated that net assets for the purposes of Practice Direction 19B should be understood to have its ordinary meaning of “total assets less total liabilities”.  It was further considered that P’s occupation of the property did not exclude from the quantification of assets for the purposes of the Practice Direction.  In short, this meant that P’s property should not be excluded from the definition of P’s assets, when determining whether to take fixed or assessed costs.

Whilst this is good news for all deputies going forward, there were questions as to whether the express definition of “net assets” in the old versions of the Practice Directions 19B should carry over to the current version.  This was suggesting that the management years where the 4.5% rule was taken, up to 2017 (when the Practice Directions were last updated), deputies could claim the full costs of the management years.  However, it was considered by HHJ Hilder that the rules up to 2017 remained, and no adjustments should be granted.

Going forward, it is recognised that costs of deputyship management files can be higher than the fixed rate regime where P’s assets are less than £16,000.  The major factor to consider is ensuring the deputyship order allows the provision for a costs assessment.  Most property and affairs deputyship orders are made “on the papers” after consideration of a formal COP1 application, where the details of P’s estate are set out in the supporting form COP1A.  The costs authorisations are part of the determination, and therefore any lack of clarity in the terms of the deputyship order should be quickly questioned for reconsideration.

If the Judge is aware that net assets are below £16,000 and orders detailed assessment of costs at the time the application was made, that is sufficient authority for the costs to be assessed.  However, specific reference on this point should be provided.  Where it is not, deputies are provided guidance within the judgment to make a speedy application (COP9 and supporting COP24 witness statement) to specifically address this point to ensure such proceedings similar to those brought in this case will not be required further down the line.

Further guidance was also helpfully included within the judgment relating to payment of the deputy’s costs.  If P continues to reside in the property and cash assets are limited, how will the deputy be paid?  A separate application would need to be made to secure the debt against P’s property, with said debt to be realised following any sale of the property.

There have been many challenges and difficulties faced by deputies, but finally there appears to be some clarity on defining P’s assets.  This is considered a significant step in managing these unique types of cases and alleviates confusion surrounding what costs should be taken.

Here at A&M Bacon, we have considered these challenges with many deputies, and in order to assist, we have investigated and taken matters up with the OPG to seek clarification.  Whilst there remained some unanswered responses, we have continued to pursue this case, and the recent judgment of PennTrust Ltd has seen to answer the issues.  However, please feel free to obtain the assistance of our dedicated Court of Protection team, should you feel any further areas need to be clarified.


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